Over the past couple of weeks the stock market has been in a holding pattern, with yesterday's 280 point loss being the first major move in several trading days. It is my belief that the market is in a watch and wait mode right now. The Dow currently sits a little less than 7% down from its highs reached last month, so this correction has at least for the time being stayed under control quite well. 
The next major event for the stock market is the FOMC monetary policy meeting which concludes September 18th. It is always said that this is a very important FOMC meeting, but this next meeting is truly extremely important to the direction of the markets. With all of the credit market fears and the terrible housing numbers of late, the Fed is being looked to for direction more so than in a very long time.
I am currently in a mode where I will likely be doing some buying on dips in the market, because I truly do believe in the long-term outlook for the U.S. financial markets. I certainly will not be committing all of my cash in the coming weeks though, because I feel the prudent investor will hold back at least some of their cash until after the FOMC monetary policy meeting September 18th. After that time the picture will likely become clearer. Yes, it is possible that if the Fed cuts interest rates the markets will move higher quickly right after the meeting, and yes you could miss out on some gains. However, if the Fed surprises the market and does not lower rates or has some other bit of news that spooks the market, the indices are liable to plunge lower in a big way.
The market will be watching any news on the current economic picture, especially as it relates to the credit markets very closely in the next few weeks. I find it unlikely though that the market will have any sort of real defined trend until after the meeting.
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