FOMC This Week – Watch For Nervous Trading and Small Pullback – Buy Dips

Posted 9:30 AM ET - The market blew through the all-time high last week and this breakout is the real deal. Bullish speculation is lofty and I expect to see a small shake out this week. The FOMC statement on Wednesday could spark a little profit-taking. There is little doubt that the Fed will hike on Wednesday. Traders will be much more interested in their statement and they will be trying to gauge the timing for the next move. I believe the Fed wants a smooth transition of power and they will point to the back half of 2017 for the next rate hike. This would have sparked a rally if the market had not run up 3%. China's inflation is creeping higher and the PBOC has been tightening money supply. This will put upward pressure on interest rates. Global economic growth has been improving and that will help the market shoulder higher interest rates in 2017. This trend of improving activity needs to continue. Oil is up sharply this morning and basic material stocks will move higher. Tech stocks are retreating on the move and ideally they will stabilize. We don't want one sector to rally at the expense of another sector. That is a sign that new money is not coming in to the market and that old money is just shifting between assets. Our best chance for a market pullback will come this week. I'm not looking for big move, just a small shake out. Buyers are lined up and any dip will be brief and shallow. I will not day trade the first 30 minutes. The market has run hard and I need to gauge the strength of the bid. Once I'm confident that buyers are engaged, I will start scaling into long positions. Energy stocks will gap higher and the best trade will come when they pullback and compress. Gap up opens are difficult to trade. If we have one this week it will probably represent a shorting opportunity. Profit-taking will spark a reversal and that momentum could continue the entire day. Again, I'm not looking for a big decline, just a brief shake out. Buy dips. . .

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