Don't Buy the Fed Rally

As is so often the case, the market reaction to the Fed's statement late in Wednesday's session led to wide and rapid swings in both directions. But underlying this were two factors. First was that the markets were right on a support level, as we observed earlier in the week. Secondly, we were seeing narrow trading ranges and little price movement as the public awaited the Fed news. Consequently, a relief rally was to be expected, and it did occur. 

However, this rally does not take us out of the trading range that began to form in November, and which has the appearance of a rolling over from an up market to a down market. Looking at the second chart, below, we see that the volatility index, the VIX, quickly moved back to very complacent levels. That is bothersome. Overconfidence is usually a harbinger of weakness. Yesterday's rally should not be, I believe, a reason to become a buyer....240 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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