Major averages fell but on lower volume after the Chinese markets tanked once again. All major averages are under their respective 50dmas, but should the market continue the sloppy sideways pattern it began in late 2014, it could find a floor sooner than later. That said, the market lives to surprise so further damage could be in store. Thus, it is always more important to safeguard against losses, so if you are still long any stocks, keep stops tight as moving to cash is always prudent when the market is undergoing a correction, even if a minor one. Stocks in this environment tend to take the staircase up and the trapdoor down.
Futures are up more than 0.5% at the time of this writing as the two-day Federal Reserve meeting kicks off today. A statement is due at 2 p.m. on Wednesday. Chairwoman Janet Yellen has previously indicated that a rate increase is on the cards before the end of the year, though expectations for a September hike have faded, partly due to market turmoil in China and a continuing slide in commodity prices including oil.
“The Fed will surely bring the Chinese selloff and commodity rout under their consideration and will tailor their response accordingly. We do not think that Yellen will fan the fire any further by bringing the exact timeline for a rate hike. In fact, there is a strong possibility that she may water down those expectations and use a very dovish approach,” said Naeem Aslam, chief market analyst at AvaTrade, in a note.
Indeed, Yellen is well known for her dovish stance on not undoing what the central bank has done with respect to quantitative easing since 2009.
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