Light Volume Selloff Ahead of Fed Meeting
Last week, I commented on a trade update that I was taking profits in Las Vegas Sands (LVS) as the stock had moved up appreciably from its summer swoon.
The stocks has continued to move higher, and now it has rallied so much that is looks both overbought and overextended. This makes the stock vulnerable to at least a short-term pullback.
A look at the chart above shows the multi-day spike shares have just experienced. Also, you can see that it is heavily overbought on the RSI scale. I took a short position in the stock at the close, but just as a very short-term trade.
The market pulled back today, but volume was extremely light. It seems everybody is sitting on their hands until we get the earnings report from Lehman (LEH) in the morning, and the FOMC announcement later tomorrow.
The volatility indexes surged +6% today, and the put/call ratios rose throughout the day. Most investors believe the market will selloff after the FOMC announcement tomorrow, and were either raising cash or buying protection (put options) today.
I hate to run with the consensus, but this time I can't help myself. I don't think there is anything this Fed is likely to do that will sooth the market. And I don't think they really want to sooth the market.
I think they will likely lower the fed funds rate by 25 bps, and maybe take the discount rate down another 50 bps. This latter move would be nice, but it probably still won't keep the market from declining.
Beyond this week, I still like this market into year-end, and want to use any upcoming weakness to redeploy funds that I recently raised.