Tuesday, December 16, 2008

State of the Market - 12/16/08

Figures I pick today to have two straight days of meetings at work. I was away from the computer for most of the day except the final hour, so my summary may be shorter than usual today. The big news today was the Fed rate decision, and the market did rally higher in anticipation of the decision. Stocks soared on news of the newest rate cut, pulled back quickly, but then blasted off again to put in big-time gains into the final hour. They consolidated those gains quite nicely for most of the last hour (not counting one quick spike down that was bought) before closing near their highs for the day. Volume does not appear to be overwhelming but was definitely heavier than yesterday.

Technically, the Dow is the only index that closed clearly above its 50 day moving average, but the Nasdaq and S&P closed right around that level if not slightly above. I wish they would have been able to clearly bust through these, but that may be asking too much for one trading session. There is some resistance just above the closing levels of today around 918 for the S&P and 1602 for the Nasdaq, and if we get through those levels (hopefully on heavier volume) then I would get much more bullish than I am now. It would signify another higher low and higher high being put in on the indices and that is bullish. It looks like the VIX has broken down through its most recent support so that should also be good news for bulls.

When I got home around 3:00, it took me a while to get caught up with the action and with what was happening. My first instinct was to not trust the move - any rational person cannot see the lowest rates in our country's history as "good" news (I see it as a sign of panic myself), but the stock market is certainly not rational. I saw a lot of individual stocks that looked decent, but they also had not broken above some key resistance points I was watching, so I passed on taking any longs today. Perhaps I will tomorrow if these stocks breakout (I'll try to show these stocks tonight in a video) but I didn't feel like anticipating a breakout here, especially with the Fed decision causing this spike. Everyone knows that things are usually volatile immediately following the rate decision, and we could easily be down 300 points tomorrow as the market tries to make up its mind about whether it likes or dislikes the decision. As I said yesterday, I would rather be safe than sorry right now, and since I will be at another meeting tomorrow, passing for the moment seemed like the best play. I am willing to go long again, but I just don't want to be early and get whipsawed once again. Hopefully I can find a way to be near a computer tomorrow because it will probably be an interesting day.

As I said, I will be back later with a video that shows some of the stocks I am watching closely. Today's action was certainly good for the bulls and we certainly could rally further here. Hopefully we will. We have seasonality with us and if we make another higher high tomorrow, then we could take off to close out the year. You just always have to be careful around Fed days however - you never know what the market is going to do until after a few days have passed. That's why I am going to wait a bit here. Good luck Wednesday.

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