Mark Your Calendar
Over the past several months, Europe has been dealing with low inflation and
the possible threat of deflation. The market will be paying close attention
between now and the next European Central Bank (ECB) statement. From Bloomberg:
The European Central Bank's public debate over buying government bonds
is reaching a climax. After weeks of argument about quantitative easing
in speeches and interviews, officials have just a few days left before
a conventional quiet period starts ahead of their Jan. 22 policy meeting.
Adding to the intensity, a European court opinion is due that could color
any program.
Big Moves Often Follow
While the interest rate vs. U.S. growth debate has weighed on stocks in recent
months, the sideways action in U.S. stocks (see chart below) has been caused,
in part, by ongoing concerns about the European economy.
Given the sideways nature of the typical U.S. stock in recent months, this
week's video takes a historical look (1981-2014) at indecisive markets and
answers the question:
What typically happens next?
The first part of the video looks at the present day market (retracements,
patterns, trends). The historical review of indecisive markets begins at the
7:00 mark.
Video: Catching the Next Big Move
Investment Implications - The Weight Of The Evidence
The big picture for equities still looks favorable, but stocks have little
margin for error in the next few weeks. If the S&P 500 breaks its recent
lows (1992 & 1972), the risk-off case will gain some additional traction.
Just as the reaction to the Fed is often binary, the ECB's January 22 announcement
could send equities flying higher or into a tailspin.
