Fed's Rally...
It's getting to the point that you can almost count on the Fed to come out with something to propel this market on a monthly basis. The fact that this market is up 400+, the most point gain in about 5 years, suggest that market participants really liked the Fed announcements today. The only beef people may have today is that "why wouldn't Fed foresee the problem we are having now months ago?" Well, the truth is, it isn't a problem to Fed until it's really problematic. In case you didn't understand what the Fed did today, it's basically trying to "save" our capital market. Whether Fed's policy will succeed or not, we won't be able to tell for months down the road. For now, this "temporary fix" seems to have many market participant's mojo going. We now need to see money come off the sidelines. The fact this move was 'unprecedented' and involved other countries getting into the act made it seem different and possibly give it some legs today without the usual sell off. We said a bounce was conveniently set up for today, this FED just made it more so and we went after pieces of many stocks as we discussed.
Yes, prior to today, we were down 7 out of 8 trading days and we just broke through major support coming into today. Today's action effectively erased the fear that we were way oversold the last little while. When you have these many points gain, you can see and tell how market participants are emotional and excited to see a good ole green day. The question now, does today's move signify that a major rally is under way? Did we double bottom? On the technical side tonight, we are right back toward the previous support of around 12100 Dow and 1320 SPX, which now act as resistance. We'd also look to IWM 67.40's as a hurdle for those watching the intraday ticks, we noted this level in alerts to watch last week for direction. When that level cracked, it has been down all the way till today. For a monumental move like we had today, you'd be sure that there'd be consolidation in the coming days. This market has become very technical lately and without sustained positive news development, we believe it's very difficult to move up in a meaningful way. Sure, we aren't taking today's move lightly, so we'll try to stay neutral the next couple of days until we see where the next move leads us. We still have a Fed meeting coming up next week. Based on the reaction today, we don't think next week's meeting has that much more significance as the rate cut has been fully been priced in for a while. What we want to see, however, is Fed's attitude toward the recent economic data which points to a recessionary environment that also tags on inflation. So far, Fed has been mainly taking action to help out the financial sector which is the most important agenda in this market right now in our opinion.
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One real concern is the BSC situation that must be resolved. Good or bad to move on. The financials, the market were acting too wildly on this stocks back today.
As far as stock action goes, this market can go from extremely oversold condition to overbought on one days move. This is why we alerted we are backing out late in the day. If we miss a gap up tomorrow, that's fine, as we expect any immediate follow through to encounter resistance noted above. Right now, we aren't going to chase any solars, shippers or technology stocks past today. If anything, we'd be inclined to start to short some from those sectors in the coming days. On the long side, we'll wait for agri/chem to stabilize before we re-enter after today's trade and we are sticking with some Oils & G ( BZP hit $21 ) and steel ( STLD guides higher in ah) stocks before the solars/ships/techs. This market definitely gives headaches to those who lean heavily to one side for too long. It's essential to have both sides covered in order to minimize the risk that the market runs the opposite direction of your plays.