Stock Market Doom and Gloom Into FED Day Rate Decision
Tuesday was another difficult trading day for global stock markets, as investors aggressively sold stocks. Global growth remains concerning, while gloom and doom permeate the financial media. Shorts continue to work in the short-term.
Summary
U.S. futures improved in early trading, as investors turn their focus to the Federal Reserve press conference later in the session.
The S&P 500 closed at 2546.16, testing the lows printed on February 9th of this year. The majors rebounded in the last hour, as shorts covered their positions. Breadth is at a turning point. Previous dips below (-30%) have led to recoveries and great entry points for short-term positioning.
The American Association of Individual Investors (AAII)
This popular sentiment survey showed the most pessimistic results since April 2013. Investor sentiment, AAII data, remains significantly depressed. Bears are increasingly bold.
Stock Markets – Additional Contrarian Signals
The financial media has run rampant with gloom and doom articles in recent days. Many market professionals have seized on this sentiment as a reason to dip into stocks showing relative strength.
Pessimistic extremes have provided excellent buying opportunities; paraphrasing Warren Buffett, “when investors are fearful, seize the opportunity.”
Still, there is no bid in the market as investors, traders and institutions await the FED decision, so what are we going to do next?
- If the rate decision is positive for equities, we will begin scaling back on our hedges. We’ll most likely reduce our exposure to bonds.
- If the markets read the FED decision as negative, and price action loses the February lows on above-average volume, we’ll add to hedges SPXU, SQQQ and SDOW. We’ll keep our current overweight exposure to bonds (AGG TLT).
Join us today for the FOMC decision as we broadcast via LIVESTREAM during market hours. Watch, listen and trade from 9:20 AM to 4:15 PM Monday through Friday.
Happy Trading,
Vinny
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