Stocks were up nicely prior to the FOMC policy statement yesterday but quickly plummeted after the announcement. From there, the bulls jumped right back in and the Dow, which briefly turned negative, skyrocketed into the close with a 198-point gain.
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The Fed indicated that a December rate hike is still on the table, downplaying any negative headwinds in the economy.
At this point what investors want, a strong economy and higher rates, or a weaker economy and lower rates, depends on what day you ask them. Obviously the initial reaction after the policy statement was that they don't want a rate hike. But apparently they changed their mind about 30 minutes later.
Oil was up sharply on the day, perhaps related to the Fed's more dovish outlook on the economy.
The SPY (S&P 500 / C-fund) ended the day near the resistance line and the top of the rising trading channel. Volume picked up but that was a product of the trading that comes after an FOMC policy statement. The only thing not to like here is that it is extended and probably due for a healthy pullback at this point.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The Dow Completion Index (small caps / S-Fund) was the big winner yesterday as it showed relative strength throughout the day. It broke above the key resistance we have been watching, but the there is a little more in the form of a descending resistance line (red).
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The Dow Transportation Index was down for most of the day, which was a bit of a warning sign amidst the rally, but it did create a positive reversal day by the close. It does remain below the 50-day EMA and 200-day EMA so there are still some issues for this market leader.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The EFA (EAFE Index / I-fund) was up but lagged the U.S. indices, mostly because of the strength in the dollar, but also the timing of the rally in the U.S.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The dollar was up sharply, hence the I-fund lagging yesterday.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The AGG (bonds / F-fund) fell on the news that the Fed is on board a possible rate hike in December. Bond prices fall when yields rise.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
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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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