SHORT TERM: market closes lower after rate cut, DOW -37
Overnight all the Asian markets were lower, and Europe was as well. US stocks opened on the downside as they have done for the past few days, but rallied back to unchanged by 11:00. After that the market went on pause, as it usually does just before a FED FOMC decision. At 2:15 The FED announced a 50 bps cut in fed funds, on the heals of a Q4 GDP report of only +0.6% growth: http://www.federalreserve.gov/newsevents/press/monetary/20080130a.htm The market surged on the news, rallying to 1386 by 3:00. But that was the high of the day and the market sold off dramatically in the last hour of trading, and in the after hours market as well. For the day the SPX/DOW lost 0.40%, and the NDX/NAZ were mixed. Support for the SPX remains at 1344 and then 1327, with resistance at 1364 and then 1383. Short term momentum spiked higher on the rally, but is now heading lower. It was certainly an uninspiring day for those expecting this rally to continue to somewhat higher levels. FED days are usually quite volatile, and this one was certainly no exception. During today’s rally the minimum target of SPX 1383 was hit near 3:00. This level represents a fibonacci 38.2% retracement of the entire bear market decline thus far. Naturally a 50% retracement would have been preferred. But FED decisions have often been turning points in this bear market thus far. And the markets decision was most certainly to the downside after the short lived euphoria of an accommodative FED wore off. We should know if that was indeed the top of this rally in the next couple of days. Tomorrow, before the open, the core PCE will be reported, along with the Chicago Purchasing Managers index, and the unemployment report. On friday is the jobs report, and ISM. Best to your trading!
MEDIUM TERM: continuation of the rally from the SPX 1270 is now threatened
LONG TERM: bear market