Market action is surprisingly dull in front of the very important Federal Reserve interest rate decision at 2 p.m. ET here on Wednesday. The indices have minor losses and breadth is weak, with about 2,500 gainers to 4,075 losers. There are around 75 stocks hitting new 12-month highs but there are no pockets of strength. I scan the market for stocks that are up more than 5% and only three priced over $10 meet that threshold.
Like many other market participants, I'm struggling to find an explanation for this surprising dull action in the indices despite a number of significant developments recently. Big moves in oil, bonds and momentum stocks have had little impact on the indices and market players don't seem to think much is going to happen on the Fed front.
Perhaps this lack of energy is a contrary move because there have been so many new predictions lately of market drama. I can't recall any time in the last 10 years when there have been more predictions of a major market correction. However, events that could serve as potential catalysts are not producing many reactions.
Maybe the Fed will shake things up but the market is not acting like it is expecting much. If the Fed does not cut I expect to see a significant negative reaction, but the odds of that occurring are quite low. A quarter-point cut is expected, but if that occurs then the focus is going to be on hints of further cuts. If there is a half-point cut many market players will be stunned and it will create a supply of buyers looking for entries.
The overall sentiment feels negative, with many market players looking for selling on a quarter-point cut. If there is a selloff on a quarter-point cut I'll be looking for buyers to show up very quickly. Fed Chairman Jerome Powell is likely to stay very vague about future cuts, which will help to maintain some buying support.
I'd like to be more active, but without stronger emotions all we have is random action.