Don’t Stick Your Neck Out Unnecessarily Today

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Stocks rallied Tuesday on the expectation that the Federal Reserve announcement today will not be as hawkish as earlier anticipated. The Wall Street Journal ‘s chief economics correspondent Jon Hilsenrath noted that the Fed’s language would probably indicate interest rates would remain low for a “considerable time.” That was all that was needed to rally stocks and send the Dow industrials to a new intraday high.

China said it will provide $89.5 billion to its top five banks through a short-term lending facility in a stimulus effort to support economic growth. European markets fell as polls from Scotland indicated a strong possibility of a vote for independence from Britain.

The Labor Department reported that producer prices were unchanged in August versus July, which matched estimates.

All 10 sectors of the S&P 500 ended higher with defensive health care and utilities leading. Biotech stocks rose with the iShares Nasdaq Biotechnology (IBB) gaining 1.8%.

At Tuesday’s close, the Dow Jones Industrial Average gained 101 points at 17,132, the S&P 500 rose 15 points to 1,999, the Nasdaq gained 34 points at 4,553, and the Russell 2000 was up 4 points at 1,151.

The NYSE’s primary market traded 648 million shares with total volume of 3.1 billion shares. The Nasdaq crossed 1.9 billion shares. On the Big Board, advancers outpaced decliners by 1.8-to-1, and on the Nasdaq, advancers were ahead by 1.2-to-1.

S&P MidCap 400 Chart
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Chart Key

In late August, the S&P MidCap 400 index missed a new closing high by a mere fraction of a point. On Tuesday, the index rallied from its 50-day moving average and triggered a minor buy signal from my proprietary indicator, the Collins-Bollinger Reversal (CBR).

But note that a MACD sell signal was generated four sessions back. Two prior MACD crossovers preceded corrections.

Conclusion

Words matter, so goes the saying. And when analysts rip into this afternoon’s statement following the Fed’s two-day policy meeting, words and even nuances will have on huge implications.

Despite Tuesday’s euphoria over what a Wall Street Journal correspondent thinks will be announced, it is best not to take positions based on conjecture.

The Fed’s actions have had an enormous impact on the stock market. Even if Hilsenrath is correct and the Fed indicates that its funds rate will remain at zero for a considerable time after quantitative easing is wound down, it’s better to wait for what is before risking your trading capital.

Today’s Trading Landscape

To see a list of the companies reporting earnings today, click here.

For a list of this week’s economic reports due out, click here.


Article printed from InvestorPlace Media, https://investorplace.com/2014/09/dont-go-sticking-neck-unnecessarily-today/.

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