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Fed stays pat

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The Federal Reserve did not make a move on interest rates yesterday, and the market applauded with a strong afternoon rally. The Dow gained 164-points. There were dissenters who voted for a rate hike, but in the end not many expected the Fed to do anything that could hurt the stock market before a presidential election.

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Most are looking to the December meeting for an inevitable rate hike, but officially the Fed could pull the trigger in November. They don't tend to make changes during meetings without a scheduled Economic Projection and press conference, but I guess it's possible. Although since that is before the election, it's probably not going to happen.



The SPY (S&P 500 / C-Fund) gained over 1% yesterday and it is now reaching toward the open gap near 217. The chart is not out of the woods yet as the bear flag is still intact, although getting a bit long. If or when the open gap gets filled it could be an area that we see some profit taking, because that is the nature of gaps, so if the index can keep moving above the gap toward new highs, it could propel a big rally because of the number of doubters who may have to do some short-covering to avoid losses on a breakout to the upside. That would be a good problem for the market to have, but it has work to do to get there.




The DWCPF (small caps) had a big day gaining 1.26% on the day. It too has an overhead open gap to lure it, and it is also in a bear flag so it will be important for the rally to continue or the bears will step up again and try to push things lower.




The
Nasdaq actually made a new high yesterday. It had filled its open gap last week and continued higher. Whether this means the S&P is going to follow remains to be seen. There is some ascending resistance right at yesterday's highs (green dashed line) so we'll open the day today with a test already.




The Dow Transportation Index led the way with a 1.77% gain and this market leader continues to perform well, but unlike the Nasdaq, it has a long way to go to hit its all-times highs which were hit nearly two years ago. But it is nearing the 2016 highs again.




The EFA (I-fund) had a good day with the help from weakness in the dollar. The 200-day EMA seemed to be a strong area of support so far and now the test will be the 60 area, if it can fill that open gap first.





Here's the dollar slipping yesterday, filling its open gap near 24.7. The overhead resistance of the top of the pennant formation held again, and now it may possibly be looking to test the bottom of that pennant.




The AGG (Bonds / F-fund) rallied on the non-hike but like the S&P and small caps, it couldn't quite push high enough to close its open gap. The bear flag remains intact and looks like it has some work to do.




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Thanks for reading. We'll see you back here tomorrow.

Tom Crowley


Posted daily at www.tsptalk.com/comments.php

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S&P500 (C Fund) (delayed)

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DWCPF (S Fund) (delayed)

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EFA (I Fund) (delayed)

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BND (F Fund) (delayed)

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