We have some typical pre-Fed trading Thursday morning with some flat and random action. The indices are mixed with minor changes but breadth is poor with about 2,700 gainers to 4,200 decliners. And once again there are more 12-month highs than lows, although both are at very low levels.
Wednesday's big move was a technical follow-through day, which bodes well statistically. It comes at a good time as positive seasonality is kicking in now and lasts through January. The big issue is whether there will be macro matters that get in the way. One clue will arrive when the FOMC issues its policy report at 2 p.m. ET.
No one expects the Fed to raise rates Thursday but the algorithms will respond to the headlines regardless and there will be some movement. Lately the market has not been reacting positively to Fed news and I would not be surprised to see some selling pressure on the announcement. However, after the surge Wednesday there should be some dip buyers lurking.
While I continue to find few attractive chart setups, I did add to a position this morning in Affirmed NV (AFMD) and am accumulating NIO Inc. (NIO) as it develops. There are a few other things, but I am sitting on more than 50% cash since I don't see many appealing charts.
It is even harder to find good chart setups among large-cap stocks. One name that does look promising, though, is Disney (DIS) . The Action Alerts PLUS stock has been in a trading range between about $111 and $119 and had held up relatively well compared to the broader market during the corrective action in October. A move over the $118 level would likely bring in momentum buyers.
It isn't too surprising why Disney looks attractive technically. It is a good value compared to most other big caps and has the potential for upside from its earnings release Thursday after the market close. Disney is expected to earn $1.35 per share compared to $1.07 in the September quarter last year
The company missed estimates last quarter but hopes that acquisition of Twenty-First Century Fox (FOXA) assets will boost estimates is what is keeping the stock technically healthy.
I am holding Disney stock with a stop around the $114 level and will consider adding to a position if it can move through $118 with some authority.