Just as I thought the market was setting up to take another dive, it once again did what I least expected and logged a follow through day with massive gains on equally massive volume.
In spite of this, there is still plenty of reason for caution. The market's unprecedented volatility over the past month renders any move to the upside or downside questionable - the old rules about what a big volume move means don't necessarily apply here. This may have been an unwinding of short positions ahead of the Fed's announcement on interest rate policy tomorrow (a 50 or 75 basis point cut is likely). In my experience, any market movement the week of the FOMC meeting is suspect - it's prudent to wait until a couple of days after the rate announcement to see how the market reacts.
Furthermore, there is just no leadership visible. IBD shows no stocks making a new high today on the NYSE or Nasdaq, while almost 1,000 made a new low. Few stocks trade above even their 200 day moving average, as I've discussed before this is woeful.
Nonetheless, I will not dismiss this new rally outright. Despite all the bad news (or because of it), we may see a powerful snap-back rally. I have one stock on my watchlist, and will keep an open mind if other stocks make my screen. In the meantime, I'm in no rush and will 'let the market come to me,' so to speak.
-Geoff
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