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Fed cuts, market rallies, Apple and Facebook shine afterhours

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Stocks were flat for most of the day on Wednesday, chopping around in a tight range even after the Fed rate decision, but once Powell started his press conference, investors got a better sense that he may not be done cutting rates if the situation called for another. Basically it was not a 'one more and done' announcement as many expected. The Dow closed near the highs of the day gaining 115-points. Small caps lagged ending the day flat while the Transports were hit with a hard 1.8% loss, but actually rallied strongly off the lows of the day.

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The Fed did cut the interest rate by rate 0.25% as expected, but they are unlikely to cut in December, unless something happens that warrants it, which is what you would hope for, so the market applauded the press conference comments.

After the bell Apple and Facebook were up in after hours trading on earnings, propelling the Nasdaq 100 futures, and to a slightly lesser degree, the S&P 500 higher and further into new high territory.

It's interesting that the market has been rallying into this report so is this a blow-off top, or the start of something similar to what we saw in the beginning of the year?

I drew in a comparable sized box of the current rally in the S&P vs. the rally off last December's low, which is about 200-points, and you can see that there is little comparison. Of course the December low came after a 20% decline so we might not expect the same type of explosive rally off the recent October low.

Back then, in January 2019, Apple rallied after their earnings report, but it had been beaten down badly for months before the earnings were released.

Basically I'm asking, can Apple rally again, after it has already rallied strongly into the report for months?

The House of Representatives plans to hold a vote on an impeachment inquiry today. For those of you who don't follow politics, this isn't a vote on whether they are going to impeach President Trump or not, but rather they will vote basically on how the next stage of the process will proceed, which is still important and could impact the eventual outcome.

On Friday we'll get the October jobs report this Friday and estimates are looking for a gain of 90,000 jobs, and an unemployment rate of 3.6%.

The S&P 500 (C-fund) was all over the place yesterday, but that's what you'd expect on a day where interest rates are changed. It filled an open gap below and then closed at a new high. The action was good into the close but we've come a long way since the early October low. Can Apple keep this rally going, or is this a signal to take some profits?

The S-fund lagged all day but also got back a large early loss after filling its open gap. It could find support at the old blue descending resistance line on any pullback, but this chart is still lagging the S&P 500 and we can say it is hitting a double top looking at the September highs. Maybe it needs a break?

The Dow Transportation Index was down nearly 3% at its lows yesterday and you can see in the chart that it broke down from the rising channel after Monday's negative reversal. Can it bounce right back from this or does it need more churning below the old highs? The technical analysis may be telling us that a test of the 50 or 200-day EMA's could need to get tested.

The EFA (I-fund) had a big day as the dollar rallied early, but tumbled late. It fell below the rising trading channel which may now act as resistance, but that doesn't mean the upward trend will break, although if U.S. stocks do pullback, then its likely that the EFA will follow.

The Dollar rallied initially off the Fed decision, broke above the 50-day EMA, but then reversed course and dropped hard back below it, and also failed at that descending resistance line (blue line).

The AGG (bonds / F-fund) rallied on the Fed decision and the drop in the dollar, but only back up to the bottom of that old broken support line and the 20-day EMA. A move above those levels would be bullish for bonds, but as of now it is at a resistance level.

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

Tom Crowley

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