The stock market is all about timing. If you can read the different patterns and time your moves alongside them, Wall Street can seem like your own personal bank.
And tomorrow might be the most important time for the stock market all year, and possibly even for several years to come.
Why? Because there are a couple of major situations coming together that could prove to be a perfect storm for the market…
There’s an effect in meteorology known as the Fujiwhara effect, named after Japanese meteorologist Sakuhei Fujiwhara. This is basically when two cyclones meet and merge into one larger cyclone.
Imagine two hurricanes combining to form a massive hurricane.
Not to be overdramatic, but that was my first thought when I realized what’s forming right now for the stock market. Just like any kind of weather anywhere, the situation unfolding for Wall Street is far from easily predictable, but we have to be prepared either way.
Better safe than sorry, right?
Let’s take a look at the two market cyclones that could be coming together as early as tomorrow…
1. The Fed
We’ve been waiting and waiting for the Fed to raise rates. And when they finally gave us some clarity and announced that they would likely raise interest rates starting in September, the market went and fell out the window. That threw us right back into a stage of uncertainty, and now we’re left to wait for the Fed’s announcement on rates tomorrow.
And that is coming at a very vulnerable time for the stock market…
2. Market Trends
Since August’s big fall for Wall Street, we’ve seen the market try to bounce back and then bounce back and forth between two pretty clear trend lines. The interesting part about those lines is that they’re rapidly converging. Take a look for yourself (Chart of the S&P 500 from Stockcharts.com):
The market doesn’t really have a choice any longer. With strong trend lines like that, it’s going to have to pick a direction. This on its own would be a very important time for the market, but when you mix in the Fed and interest rates, we could be on the verge of something big.
The most drastic scenario is that the Fed hikes rates and the market breaks down in a significant way simultaneously. That could be the final straw that sends us into a sever bear market.
But there’s also a chance for the opposite to happen. And either way, we can make money from the market by using the right tools at the right times.
Also note that the anticipation of the Fed’s announcement tomorrow could be enough to push the market one way or another before the announcement is even made. Be on your toes and look for any sign of significant market action today.
