Yesterday turned into one of those classic “buy the rumor, sell the fact” situations as the Fed’s unchanged stance on interest rates failed to inspire the buyers.
Actually, the bears took over, and the major indexes headed straight south, although the losses were moderate given the size of the rally since the March 09 lows.
The initial reaction after the Fed announcement was positive, as the chart shows, but disappointment over lack of bullishness in the language disappointed traders and off the highs we went.
Our Trend Tracking Indexes (TTIs) retreated slightly but remain firmly in bullish territory:
Domestic TTI: +8.30%
International TTI: +16.82%
Hedge TTI: +3.32%
We will now have to see if the pattern of the past few months repeats itself, meaning that the moment the indexes give back about 1%, buying sets in, and we’re on our way to higher highs.
Sooner or later this trend will come to an end and reverse. Be prepared by having your trailing sell stops in place so that you can exit at a moments notice, should market behavior dictate such action.