The market suffered some nervous action on Tuesday as the big cap technology stocks gave back Monday's gains and market participants positioned for major earnings reports and the Federal Reserve's interest rate policy decision.
The Fed will release its policy statement at 2 pm Eastern time. Fed Chairman Jerome Powell follows with a news conference starting at 2:30 pm. It is not expected that any major policies will be announced but the market will be looking for hints of what may come next.
It is already established that the Fed is "not even thinking about thinking about raising rates" but the question of further monetary stimulus is still wide open. The current position of the Fed is to maintain maximum flexibility as the very uncertain economic conditions develop further.
Typically the market takes comfort in the Fed and the assurances that it will continue to do whatever is necessary to support the economy. There will be no policy moves to slow things down although inflation is starting to become a more apparent issue.
In addition to the Fed, major earnings will be the focus but first there will be Congressional testimony from Facebook's (FB) Zuckerberg, Amazon's (AMZN) Bezos, Apple's (AAPL) Cook, and Alphabet's (GOOGL) Pichai. The hearing will be the usual sideshow with the usual pontification but it may have some impact on market sentiment surrounding the FATMAAN stocks.
(For more on the hearings, see Jim Cramer: I Care About What's Left of American Success in a Globalized Economy)
The real test of this market will come on Thursday night when Apple, Amazon, and Alphabet report earnings. It is a classic 'sell the news' situation but that is already being anticipated to some extent.
While there is likely to be some mixed action in the indices, retail traders will stay busy looking for small-cap movers. Kodak (KODK) was the star of the show on Tuesday and the day traders will be looking for the next opportunity.
The pockets of speculative trading have been narrowing in the last few days but this trading is providing consistent underlying support. It is when the dip buyers disappear that it will be time to worry but there are no signs of that happening so far.