In recent times I have been mentioning we may now be in for a bumpy ride.
Above is the S&P 500, Dow Jones Industrials and Nasdaq Composite.
This is because, after the Fed announcement yesterday, the market can take a step back and look at the big picture.
I think it is obvious to everyone the economy is not doing well with businesses closed and a lack of tourism around the globe. The Fed can only do so much and with the market at resistance needing a catalyst, there will be fewer options for them.
- Earnings are likely to disappoint.
- Dividends may not be made.
- Companies will go bankrupt.
While the economy and stock market are not completely correlated, the market momentum needs reasons to continue in challenging economic environments.
So if the reasons are not apparent then the price action will start to flail. This will take out the weak traders and maybe even test the stronger ones. The job is to remove as many investors as possible before resuming the trend.
So today we need to stand aside and wait to see what price does before we continue to fund the market.
Lets go trade!