Market Reaction to September FOMC meeting

Today, the market decides to take some profit before the FOMC meeting on Wed and Thu. The good sign of today's drop is that there is not a large volume associated with that. I sold 80% of my positions within 30 minutes after market open. Tomorrow's market will be pretty much as quiet as today. It be very likely to keep sliding further down toward the 30-day moving average.

As long as the pull back is mild and not associated with a large volume, it will still have a great chance to rally after the FOMC's meeting. Regardless of the outcome of new QE3, the market will continue it's up-trend for at least another week before completing its last wave.

How to Interpret the Market Using Elliot Wave theory?

I use QQQ's daily chart as example, in which I indicates the 5 waves on the chart. We are currently at the last wave (wave 5). Once this wave is completed, we should be facing a several-month sizable correction, which may send the market down to somewhere close to its 400-day moving average. We should be extremely cautious at the current market stage. If your individual stocks still don't have good performance, be prepare to sell them when the market shows signs of side way consolidation with large volume associated.

Buy or Sell Now? 

Since I have already sold out 80% of my positions, I am currently waiting to buy them back at around its 30-day moving average. I still believe that the market still has some upside potential. But, if you are risk averse, you should not increase your positions. Instead, you should find good timing to sell your positions and raise cash.