The market is in wait and see mode as we hear from the Fed today and the ECB tomorrow morning. Clearly the more important decision will be coming from the ECB. If the ECB does not do something drastic than the trajectory of European and global growth is likely going lower. If the ECB does something drastic the hope is that we would end the vicious cycle and enter a virtuous cycle of higher prices, confidence and growth.
Market sentiment is muddled. Newsletter writers measured by Investors Intelligence actually turned slightly less bullish this week. I was expecting to see a big uptick in bulls after this weeks rise. Rydex traders turned even more bullish yesterday. There is no clear signal from the sentiment indicators.
I have had very mixed views on the market for a few weeks now. The only thing I feel strongly about is that if the ECB does not act forcefully tomorrow the economy will continue to deteriorate.