Indicators Indicate 'Wait And See'

 | Sep 05, 2012 12:44PM ET

September was heralded as the month of decision, and it is right to say that we are almost there, but not yet. Until decisions have been made, gauging the market requires using an internal scope to see how the intermarkets are playing out. The ECB congregates Thursday, and there seems to be some hope that, as limited as it may be, they will make some provisions. The semantics of short term lending and its legality have been thrown around, as well as the ambitions of an unlimited bond buying program. Whatever is to come from Europe is still unknown, but what we do know is that Germany will have its say in the matter.

The Federal Reserve is similarly in the process of triggering QE3 or not. Many believe that the next few weeks of economic data will play a deciding role in the decision, but that may be too rudimentary in thought. Considering stimulus will inevitably lead to price inflation, Bernanke may hold off on directly hitting the consumer. With the fragility of the Middle East and inflation seen in agriculture, the Fed may deem this an inappropriate time to weaken the dollar. The possibility of some other form of obscure easing could also be on the horizon.

Dividend Index
A theme seen throughout the latest rally was the demand of dividend paying instruments. With the seemingly yield-less government debt and fear of risk in particular assets, safer dividend plays were all the rage. The indicator below is that of a select dividend index (XLU ) outperform the broader market. This indicator has seen a breakout lower, but is somewhat bottoming at its current levels. There could be a move back up to the rectangle or simply a sideways move. Whatever is the case, strength in this indicator indicates volatility in broader markets.

XLU

The magnitude of charts is needed at due to a seeming lack of headlines influencing markets. We are at a wait-and-see moment and these indicators confirm that.

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