Stocks Rally On Weak Internals

The Stock Indices rallied today but volume and breadth were declining. This suggests the rally may still be a countertrend move. However, any additional price development higher would suggest the move is developing into a rotational pattern and we could see a significant move higher. The problem with developing a strategy for next week is the Fed announcement and briefing on Wednesday will certainly have the impact of changing the perception of value on the part of traders and investors. Therefore, until the announcement is over use caution. If the Fed does not hint at some type of interest rate relaxation, another leg lower could develop quickly. On the other hand, a hint at reduced rate increases could send the market much higher.

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