Karpel’s Corner: September Sellers Take a Break Ahead of FOMC

Welcome to Karpel’s Corner. This is where I throw out my thoughts on the markets and share some of my favorite strategies. I keep it market-focused, and never miss an opportunity to teach trading strategies and commentate on the latest trends affecting the financial markets. Hope you enjoy today’s post!

Yes, September did have some sellers come into play but yesterday’s action shows that the Bull is not ready to succumb. This is reminiscent of the little pullback in August, which preceded a market bounce that hit all-time highs.

We are now waiting on the Fed language later today, especially after the PPI came in at levels indicating the Fed should not be in a huge hurry to raise rates. With the major indices above resistance levels — 171 on the Dow Jones — the Bulls are in control.

Right now, volatility ($VIX) has contracted considerably. And going into the Fed announcement, I, for one, am going to prepare for volatility expansion. One sector on our radar that has been beat up and could be ready for such an expansion is the Industrials ($XLI).

One name that is in this sector and on our conviction list is 3M ($MMM).  It has a score of 9, which is bullish both long- and short-term. It has an 18.5 percent probability of being above $151,and  a 25 percent probability of being below $138.7. Now, volatility is only up about ~10% from the 52-week lows, so there is not a lot of fear at this stage. A break above $145.50 would be bullish for $MMM, so keep it on your radar.

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See you next time at the Corner!