If you were a bull, you must have been excited to watch the rally unfold as all major market ETFs gained strongly.
But, what starts well does not always end well. This was the case today, as the morning rebound succumbed to profit taking in the afternoon in anticipation of what the Fed might announce tomorrow.
Will it be the widely anticipated “operation twist” to attempt to pull the economy out of the doldrums? In case you missed it, operation twist involves the Fed selling short-term assets and reinvesting the proceeds to buy longer term durations with the goal of limiting pressure on long-term rates.
Or, will they go all out with some type of shock-and-awe effect? If they do, there is a good chance that the markets will react positively; if they don’t, you might just see a sell-off as disappointment is sure to spread.
Not helping the rebound in the afternoon were news reports questioning as to whether Greece might get a short-term injection of cash to prevent a default on its bonds.
It’s uncertainty and rumors all of the time. Let’s hope the Fed’s action, or lack thereof, can give us some clue as to the major direction of the market. If not, we may be stuck in this trading range for a while longer.