The Federal Reserve finally raised interest rates by a meager 1/4 point on Wednesday, but at the same time indicated that they expect to continue raising rates over the next several meetings. The market reacted by rallying sharply in what is now a four-day move that began on Tuesday. The market apparently believes that the Fed is making a policy error by tightening when the economy is weakening, and that the Fed will soon be forced to reverse itself with another round of QE. The
NASDAQ Composite Index has now reached its 50-day moving average on the bounce with volume spiking sharply on Friday's quadruple-witching options expiration.
The
S&P 500, meanwhile, has performed in similar fashion, and some will call Wednesday's action a 15th day follow-through day. While this may be so based on what we view as outmoded rules, the greater issue is finding proper long set-ups upon which to act. So far we see little, if anything, that we find compelling as the S&P rallies into resistance at its 200-day line in a sharp four-day bounce. Our preference for now is to let things settle out since the market still has the potential for news-related risk coming out of Ukraine which has the potential to create some dangerously volatile action.
For now, we believe that investors are likely better off waiting out the current situation as risk remains high.
The
Market Direction Model (MDM) remains on a SELL signal.
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