FOMC meeting to take centrestage this week

THE local market appears to have entered an unsure, volatile patch, at least judging by last week's movements. Each day, the Straits Times Index (STI) moved in line with expectations of how Wall Street might perform later that day, probably driven by program trades looking to be proactive than reactive because then one can either sell into strength or buy the dips the following day, depending on how the US market moved.

Moreover, with the US Federal Open Market Committee (FOMC) meeting on Tuesday and Wednesday this week, we'd expect markets to trade nervously between Monday and Wednesday. This meeting will be followed by a press conference chaired by the Fed boss Janet Yellen, so markets will be listening closely to the words she uses and the signals she sends with regard to interest rates.

The problem, of course, is that Wall Street itself seems to be now unsure of what its next moves should be, the source of the uncertainty being the direction of interest rates. Should the appropriate theme be "good economic news is good for the market", or should it be "bad economic news is good for stocks"?