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| Today's Commentary (Short Term Outlook) |
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Fed statement spoils rally Stocks were mixed again yesterday as an early 140-point gain in the Dow nearly disappeared by the close. The TSP stock funds were mixed as well as the C-fund was up modestly, the S-fund dropped 0.63%, and the I-fund played catch-up after Tuesday's 1.5% loss, by gaining 1.9%. Bonds were down 0.17%. The Dow rallied strongly during the first hour of trading, but then drifted until the 2:15 PM ET Fed policy announcement. That's when things went a little wild as it usually does, and what happens today is a big question mark.  Yesterday we said, "...a move up to that rising trendline and the 20-day EMA is a good possibility. I could see a move to 1060-1070 before any downside resumes." The S&P 500 did just that as it was up 16-points within the that first hour of trading. The reason for the 1060-1070 range was because the trendline is rising so the sooner the rally, the quicker it would be to hit the trendline. Yesterday's high was 1061 and so we have to wonder if that is it or if it can continue to ride the resistance higher.  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk A closer look at the S&P 500 with a candlestick chart shows that, although the index put in a higher high and a higher low for a continued uptrend move, the S&P 500 did close near the low of the day creating a large kangaroo tail which is usually a reversal pattern.  Charts provided courtesy of www.decisionpoint.com, analysis by TSP Talk You can see above that other kangaroo tails on the high end tend to end up being near peaks, so I didn't like yesterday's late action too much. The NYSE overbought / oversold indicator is still on the oversold side, but off of the extreme level from a couple of days ago. I am thinking that we could see a move back into the 0 to +500 area (in the circle) before the next peak.  Chart provided courtesy of www.decisionpoint.com, analysis by TSP Talk That doesn't mean we won't go down first, although if we don't bounce back to at least a neutral reading soon, we could be seeing that change in character in the market we have been thinking could be coming. We still have signs of an oversold market that could rebound, but don't forget that the Dow Transportation Index chart has already broken down so a breakdown in the S&P 500 is very possible. Speaking of the Dow Transportation Index, which was up a whopping 5.3% on Tuesday, it lost about 1.5% yesterday, which sounds bad, but you'd expect a little profit taking after a 5.3% gain. Post Fed trading can be interesting in that you could see a reversal of the initial Fed initiated reaction. Well the fact that the Dow closed up on the day, but 110-point off the high, I can't tell you which way the reversal move will go - give up the 30, or gain back the 110? Cisco posted a strong earnings report after the bell yesterday and that is usually a catalyst for the market, but the futures and the Asian markets are down as I write this, so it will be interesting to to see how the market opens Thursday morning. Tomorrow (Friday) we get the October employment report so expect the volatility to continue. That's all for today. Thanks for reading. We'll see you back here tomorrow! |