It is certainly possible that if the Fed announces more QE at today's meeting that the market can rally further. But it wouldn't surprise me to see it selloff either way. I mean, if the Fed does announce more QE aren't they acknowledging that the economy has slowed more than previously thought?
In corporate news, both Adobe and Proctor & Gamble lowered profits guidance and both stocks are lower. We know Europe has slowed, China has also slowed, and if the US is slowing we could see more companies issue cautious guidance during upcoming earnings reports for Q2.
Overnight action in Asia was mostly positive, and Europe is slightly positive this morning. Spanish yields are down a bit more, which is good. And the G20 meeting in Cabo has ended without much fanfare or substantial plans. The IMF was successful in getting countries like Brazil and China to contribute more money to its coffers. I was in Cabo last week before the meeting, and you should have seen the military presence there. That place was on lock down.
The dollar is slightly weaker, but commodities are mostly lower. Oil prices have eased back to $82.60, and gold prices are lower to $1607. Silver and copper prices are lower as well.
The 10-year yield is higher again to 1.66%, and looks to be putting in a constructive basing pattern. The VIX is bouncing 2% to 18.82. I don't think the VIX will stay under 20 for too long in this environment.
Trading comment: It is very constructive that the major indexes have regained their 50-day averages. If we do get a pullback today after the FOMC announcement, I want to see those 50-day lines act as support to the market. Leading growth stocks have also been acting better, with more breaking out to new highs and another group building solid bases and retaking their respective 50-days. This could turn into a positive trend, but things need to calm down in Europe. CDS prices are still high there, indicating continued angst from investors. But for the near-term I am growing cautiously optimistic.
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