Today's Comments (Short Term Outlook)                             Printer friendly

Going for the neckline The market rallied strongly yesterday, albeit on light volume.  So far, the head and shoulders pattern is holding. The typical action of a head & shoulders pattern, once it breaks down, is to rally back up to the neckline.  When that rally is on light volume, it usually means the neckline will act as resistance and the index will head back down.  The current S&P 500 chart has two areas that can be considered a neckline.  I don't want to pick one over the other so I am looking for a possible move up to 1380 to 1410 before resistance kicks in.                                     Chart provided courtesy of www.decisionpoint.com  Volume should be light again today, as well as on Wednesday before the Fed announcement.  But then things will go back into high gear.  I'm not so sure we will head up again today, but that will keep with the pattern.  Anything can happen after the Fed rate cut.  The big question will be if the Fed cuts 0.25% or 0.50%.  The crowd will be looking for the 0.50% but how  they react should be interesting.  If we were to guess based on our charts, I'd say we could see an eventual rally up to the necklines, either before or after the rate cut announcement, then a "sell the news" reaction some time afterward, whether it's good news or bad.  That would satisfy the head and shoulders pattern.  I know that sounds like the tail wagging the dog, but the charts are more intuitive than random and they are trying to tell us something. In Trader Fred's commentary today he posted his market strength chart with a reading of -4, which is not a common reading.  The previous two times this indicator saw -4, (it hasn't had a -5 since he started following it) the S&P 500 gained no ground after three months.  There were swings in between, but three months later - no gain.  It's not a "mortgage the house" indicator, but I thought it was important enough to pass along to everyone - just in case you are trying to pick a bottom.  Making some gains in the G or F funds may be the way to go for a few weeks or months. That's all for today.  See you tomorrow. Have questions?  Visit our message board for answers.  Would you like to be on our email alert list?  We will send you an email when there is a change to our asset allocation or market outlook.  Your email address will never be given out.  Read our privacy policy.  By signing up you agree to the TSP Talk Terms of Service.  More details below **. Are you bullish or bearish?  Join the Weekly Sentiment Survey. Like what you're reading?  Tell a Friend about us.