Joshua Hayes'  Instablog

Late day selling put a damper on the post Federal Reserve announcement reaction.  Stocks fell for much of the day leading up to the Federal Reserve rate decision as volume ran heavier than Monday.  Anticipation of the Federal Reserve making a move was widely expect as their mortgage portfolio is set to mature.  The central bank announced it would begin to monetize more of the United States debt by purchasing US Treasury securities.  Reacting to the news traders appeared to cheer the Federal Reserve’s move by pushing the Dow close to positive territory.  Unfortunately, buyers didn’t have the momentum to push stocks into positive territory only to finish slightly above the mid-point on the NASDAQ and S&P 500.  Small caps weren’t so lucky with the Russell 2000 finishing near session lows below its mid-point.  We witnessed another distribution day and it is not important for the market to show us power ahead.

The good news is we do have market leaders holding up very well and that may bode well for this market.  On the negative side many of these leaders are extended from proper entry levels.  If we do see the market begin to pull back further it will be important these leaders hold up or fall back quietly.  It will give us an indication when we do move higher these stocks will continue to lead us higher.  Pay attention to these leaders as we continue to move along and hopefully you have benefited from their rise.

Distribution hasn’t piled up to the extent it would cause great concern, but if we see any further selling without upward price movement we’ll be in trouble.  It could come quick, but if heavy volume rears its ugly head make sure you take profits and cut your losses.  Especially now, if you have a stock not acting correctly it would be prudent to reduce your position.  After today, cash continues to be king as this market has yet to produce any big gains from the market.  Yes, we have leaders, but we have yet to see an established uptrend with the ability to produce solid gains.  Perhaps it is right around the corner, but until big volume comes in the the high side it will be difficult to see big gainers from the market.  Until then, we’ll continue to search for our next big winner.

It does appear if the market breaks in either direction will be swift and furious.  Be prepared for anything, stick to your daily routine.  Enjoy the market action and best of luck!