Yesterday’s session took all of the crazy gyrations of last week and put them into a single session.  The Dow rocketed out to a 130-point surge at the open, only to give up the gains by lunchtime, and then finished flat after one last rally effort.

Certainly, it was a disappointing session for those who hoped to get past last week’s anxiety.  Moreover, with the Federal Open Market Committee (FOMC) deciding on rates, it was a clear chance for the Street to exhibit confidence that the Fed will not hike rates.

The fact that several rally efforts didn’t hold underscores just how ineffective the Fed’s initiative is to communicate its actions, which have failed miserably. However, nothing has failed more than the actual Fed policy itself; it’s understandable that they have no clue on how to get out of this predicament.  (This makes the Gordian knot look like child’s play.)

I suspect that the market could be cautious again ahead of the official announcement, but expect some smart traders to position for a post-FOMC announcement pop.  Beyond there, how the vote goes down (could there be more than one hawk that goes against Yellen?) will influence the market as well.

There were bright spots such as the Russell 2000 (RUT) and the Philadelphia Semiconductor Index (SOX). I think the momentum could remain for both indices.

Home Front

The National Association of Housing released its Housing Market Index, which saw a surge in optimism that dovetails with other signs of momentum for housing. The west led the way with a giant improvement, and all facets of the report moved significantly higher.

The Philadelphia Housing Index (HGX) was higher on Monday, but it’s been really sloppy and uninspiring of late.  I don’t like the structure of the index’s holdings, which is why you must make your portfolio the ultimate fund. The chart speaks to a more worrisome problem for the sector. This week must change because higher rates generally don’t help these stocks.

Today’s Session

This morning housing starts and permits came in less than expected, and while Lennar (LEN) beat the street, the stock is looking lower after an initial pop.  I still like this niche of the economy, but it’s hampered by multiple factors including the massively high hurdle of local regulations. 

I haven’t taken the bait on many of the recent sessions that have gapped higher at the open including yesterday when 130 points vanished in a flash.  The market is consolidating gains and grappling for a catalyst.  I hope you have cash, and are ready to pounce shortly.