U.S. Equities Take A Pause Before September 2012 FOMC Meeting, Germany EFSF Decision:
U.S. stocks took a pause today as traders look forward to more easing from the Fed Reserve Bank this week. The FOMC meets later this week and traders are anticipating a new round of quantitative easing but stocks fell in anticipation investors could be disappointed. If Ben Bernanke and the Fed don’t announce a strong easing program, the market could fall to new support levels which would present buying opportunities for the long term trader.
The ECB will be meeting this week and German courts will make a ruling on whether the European Union’s EFSF/ESM stability program/bailout fund is constitutional. Once again, the ECB is reminded that politics in Germany play a pivotal role in any bond-buying program from Mario Draghi. We expected the spotlight to dim on Draghi this week as he was the center of attention and that focus now turns to Merkel and Germany.
Our analysis showed a slight pullback was possible today and we are looking for opportunities to buy stocks this week. We are neutral in the short-run and believe good opportunities to buy stocks may still be ahead but Bernanke may want to surprise investors which would keep stocks in rally mode. We are watching the FXE and UUP exchange traded funds for clues about market direction.