The indices, with the notable exception of the NDX / QQQQ, finally broke out of their recent trading ranges. It was nice to finally get a post-Fed reaction that wasn't full of violent reversals. Today's move seems to send a very clear signal:
Then again, if I remember correctly, the early January rally happened for the exact same reason as today's rally -- the market thought the Fed was close to being finished raising rates. Anyway, it was a very strong day today. The internals were very bullish, even before the Fed decision and we had percentage gains not seen in a long time. I think CNBC said that this was the largest percentage gain on the Dow since 2003. Despite today's impressive gains most of the indices are still in intermediate-term downtrends (under their 50-day moving averages) so I wouldn't sound the all-clear just yet.
Weezee asked me if I thought that I wondering if today's up day is just leading to a temporary rally as a result of the pre-holiday effect? I really don't know but it's hard not to believe that most of today's move was simply a reaction to the Fed. I can certainly see short-covering ahead of the holiday contributing to the gains. My guess is that whatever happens after the holiday will largely be driven by earnings and earnings warnings.
Charts of the indices and the trend table are below:
Lots of changes today. All the short term trends are now 'up' and I've upgraded a few others.
| Trend | Nasdaq | S&P 500 | Russell 2000 |
| Primary | Down | Up(+) | Up(+) |
| Intermediate | Down | Lat(+) | Down |
| Short-term | Up(+) | Up(+) | Up(+) |
(+) Indicates an upward reclassification today
(-) Indicates a downward reclassification today
Lat Indicates a Lateral trend
As much as the market was up today, I was not able to make much money. When the market was up big before the Fed announcement, I did not want to take a chance, and I certainly did not want to chance such a high runup before the announcement. Then after the announcement, it took off like a rocket. Upon the first pullback, I thought that the market was coming to its senses. But, it took off even further after that. Not only did I not anticipate such huge moves (before and after), I did not see many entry signals from my indicators. Perhaps I was just gunshy today.
I don't know, but it looks like a setup to me. I'm still trying to figure how so many talking heads say that the market had the 1/4 pt built in yet it took off like a rocket after it was announced. Also, has anyone else noticed that these same talking heads have been saying "this one and one more quater point" for several months now? I mean, c'mon! 17 in a row and that still makes for a soaring market along with high oil prices? Something's got to give.
I agree with Jocko- the rally probably had nothing much to do with the news of the rate hike. Didn't the CPI data "guarantee an increase" a few weeks ago? I think it had more to do with investors waiting to see if Bernanke was going to say something to accelerate a bear market. But he didn't, so the rats jumped back on the ship. My question is, will the long weekend be good for the market? For example, what will happen when investors realize most of the moving averages are still pointing down, or that the Fed didn't give a clear answer that they would stop raising rates. From a macroeconomic perspective, what happens when the Fed slows down the economy while energy costs goes up? Sorry to be so negative, but I've never asked myself the questions, 'where are we, and where are we going' so many times before. I won't be fully convinced that we've turned around until I see a better catalyst than today's 'buy on the old news.'
Hey Baby Jocko, don't sweat the prediction game. None of us can predict the future.
Hey Mike, don't forget about hte coiled spring that you pointed out earlier. There are some picture perfect perfect launches from the coiled spring in individual stocks as well. I just noticed RS for example.