Selling Unlikely To Escalate Until Wednesday
The markets are lower across the board. Japanese intervention in the currency market, coupled with worries over Italy have sparked some profit taking. The SPDR Dow Jones Industrial Average ETF (AMEX:DIA) is trading at $120.54, -1.50 (-1.23%) while the PowerShares QQQ Trust, Series 1 (ETF) (NASDAQ:QQQ) is trading at $58.37, -0.57 (-0.97%).
While the markets are nicely lower, it is unlikely the sell off will continue in the coming days. A neutral market is much more probable from here until Wednesday. The reason for this is simple, all eyes are now on the Federal Reserve policy statement on Wednesday. In addition, Friday the market will hear about job creation. The Non Farm Payrolls report will be released at 8:30am ET.
Into Wednesday, the markets will most likely hold this range, hoping for some sort of QE3 Federal Reserve talk. After that report, the markets will most likely move sharply. Talk of QE3 would be bullish, while no talk of QE3 would be very bearish.
The markets continue to be overbought short term. A 20% rally from the S&P lows in the last month could see a solid retrace if the Federal Reserve disappoints.