- When trying to figure out how the market will react to an “highly anticipated event,” it’s important to note how the stock market has acted BEFORE this “event” takes place.
- Despite a slow down in domestic economic growth, the ITB home construction ETF has broken out of its sideway range to the upside. Any upside follow-through will confirm the breakout…and be quite bullish for the group!
The market "set up" is important before "highly anticipated events."
From time to time we get a highly anticipated event in the market place. When this happens, the reaction in the stock market to the news that comes out of that “highly anticipated event” (like a key data point or an important speech/testimony) can frequently be determined by the “set up” in the markets BEFORE this event takes place.
For instance, a large decline in front of an “highly anticipated event” can soften the move in the markets after we get the actual news from that “event” if the news is bearish. It can also create an outsized rally if the “news” is much more bullish than expected…..On the flip side, if the market has seen a strong rally just before the “highly anticipated event,” it doesn’t leave the market a lot of upside potential if the news is bullish…and leaves it vulnerable to an outsized decline if the news is surprisingly bearish.
The recent "set up" limits near-term upside potential.
Of course, if there isn’t much movement before these highly anticipated events take place, the reaction can still be a big one if we get a big surprise, but that’s not the situation we’re facing right now. The “highly anticipated event” we’re facing right now is tomorrow’s speech from Fed Chairman Powell in Jackson Hole. The stock market has ...