SHORT TERM: choppy session as FED cuts rates to 1.0%, DOW -74
Overnight the Asian markets were mostly higher, Europe opened higher and closed with the FTSE +8.0% and the DAX down slightly. US index futures moved higher overnight but turned lower in the morning. At 8:30 Durable goods orders were reported +0.8% vs -5.5%. At the open the SPX traded down to 929 in the first few minutes, then rallied to 945 by 10:00. Another pullback to 929 followed by 11:00, and this time the SPX challenged the 961 pivot when hitting 955 at 1:30. Then awaiting the FED’s FOMC announcement the market started to pullback again. After the FED announced a 1/2% rate cut to 1.0%, it’s lowest level since June 2003, the pullback retested the 935 pivot for the third time today when hitting 928 by 2:30: http://www.federalreserve.gov/newsevents/press/monetary/20081029a.htm. A quick rally followed to SPX 970 by 3:30 and then the market pulled back sharply into the close. For the day the SPX/DOW were -0.95%, and the NDX/NAZ were +0.40%. Bonds were down 4 ticks, Crude rallied $5.50, Gold added $11.50 and the Euro was higher. Support for the SPX slips to 912 and then 848, with resistance at 935 and then 961. Short term momentum was overbought at the highs but finished at neutral. Tomorrow Q3 GDP, and the weekly unemployment report at 8:30. Also a speech by FED governor Kroszner at 8:30.
After today’s rally to SPX 970, the probabilities are increasing that the downtrend ended with a 5th wave diagonal triangle at yesterday’s SPX 845 low. The DOW has already exceeded that short term quadruple top between Oct 17-21, when the SPX was hitting 985. Also, commodities have now rallied three days in a row for the first time since September. A rally in this asset class would help the stock market. Major support is now at SPX 912. A break below this pivot and the market enters the vacuum again between SPX 848 and 912. Should this level hold we may experience an uptrend for the first time since August’s SPX 1313. Best to your trading!
MEDIUM TERM: downtrend low SPX 840
LONG TERM: bear market, SPX 912 important pivot