SHORT TERM: market soars on Kohn’s comments and beige book, DOW +331
Stocks gapped higher this morning after the vice chairman of the FED Kohn suggested that rates will not be going up anytime soon, and banks should be more accommodative at the loan window. Within the first few minutes of trading the SPX rallied past the resistance pivot at 1438 and continued higher. By 1:30 it challenged the next resistance pivot at 1462, steadied, and then moved higher again to close at 1469. Quite a performance considering the much beaten down financial sector rallied 5.7%. At the close the SPX/DOW gained 2.7%, and the NDX/NAZ added 3.1%. Bonds closed about 3/4 point lower, Crude was off $2.90, Gold lost $9.00, and the Euro was slightly lower. Support for the SPX is now at 1462 and then 1438, with resistance at 1484. Short term momentum is getting extremely overbought.
Today’s rally displayed many of the characteristics of a potentially sustainable advance: broadbased including techs and cyclicals, and the financial sector was strong as well. It could be the beginning of another uptrend, but it certainly wasn’t the end of Major wave 4. This happens to be the first two day rally in the entire month of November. Ever since the FED provided that meager 25 bps cut on Halloween. Suggest to observe XLF/GS/AAPL for signs of a continuation tomorrow. If the financials can enter an uptrend, it’s likely the market will have an all clear signal for the customary year end rally. Certainly at minimum it’s still a bull market!
MEDIUM TERM: correction trying to reverse
LONG TERM: bullish