First Move's the Wrong Move: Dave's Daily

Fed days often feature an initial market move after the announcement that doesn't hold.
By Dave Fry ,

FIRST MOVE'S THE WRONG MOVE

Fed days often feature the initial market move after an FOMC announcement that turns out to be the wrong move as markets reverse. So it was today as the initial jump after the announcement was met by selling. What did the Fed do or say that was different? Not much really. But, those in the business of dissecting the announcement seized, for what it's worth, on a subtle change in housing sector language. The previous announcement stated concern over "housing starts" and now the statement was "housing sector". Somebody gets paid big bucks to ferret this stuff out.

Be that as it may, stocks were higher early on Retail Sales data which was, ahem, better than expected. One thing interesting in the report was that discounting was very high and one would think this would affect profit margins. Ignored overall was the poor earnings report from Best Buy which must mean everyone has their big screen TV now.

Good news came from Amgen which announced good results on a prostrate drug.

Everyone is focused on forecasts for 2011 and we don't want to be left out. We value the judgments from the Business Monitor International (London)

in our recent interview here

Volume was once again quite light while breadth was mixed to negative per the WSJ.

Continue to U.S. Sectors, Stocks & Bonds

Continue to Currency & Commodity Markets

Continue to Overseas Markets & ETFs

The

NYMO

is a market breadth indicator that is based on the difference between the number of advancing and declining issues on the NYSE. When readings are +60/-60 markets are extended short-term.

The

McClellan Summation Index

is a long-term version of the McClellan Oscillator. It is a market breadth indicator, and interpretation is similar to that of the McClellan Oscillator, except that it is more suited to major trends. I believe readings of +1000/-1000 reveal markets as much extended.

The

VIX

is a widely used measure of market risk and is often referred to as the "investor fear gauge". Our own interpretation is highlighted in the chart above. The VIX measures the level of put option activity over a 30-day period. Greater buying of put options (protection) causes the index to rise.

Continue to Concluding Remarks

Generally the pattern has been after a Fed announcement "the first move's the wrong move" and that was true on Tuesday. While markets overall have moved higher overall it's been a fitful low volume ascent. Even on a Fed day volume was rather low. We're in the season with a lot on the line for portfolio managers for bonuses. Keeping markets stable through year-end is job one.

Wednesday provides more insight with Industrial Production, Capacity Utilization and the NAHB Housing Market Index.

Let's see what happens. You can follow our pithy comments on

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Disclaimer: Among other issues the ETF Digest maintains positions in: SPY, MDY, IWM, TNA, QQQQ, XLI, XLB, XLF, UYM, DBC, USL, GLD, SLV, DBA, JJC, XME, EFA, EEM, EWJ, EWG, EWT, EWW, EWZ, RSX & FXI.  

The charts and comments are only the author's view of market activity and aren't recommendations to buy or sell any security.  Market sectors and related ETFs are selected based on his opinion as to their importance in providing the viewer a comprehensive summary of market conditions for the featured period.  Chart annotations aren't predictive of any future market action rather they only demonstrate the author's opinion as to a range of possibilities going forward. More detailed information, including actionable alerts, are available to subscribers at

www.etfdigest.com

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This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

Dave Fry is founder and publisher of

ETF Digest

, Dave's Daily blog and the best-selling book author of

Create Your Own ETF Hedge Fund, A DIY Strategy for Private Wealth Management

, published by Wiley Finance in 2008. A detailed bio is here:

Dave Fry.

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