SHORT TERM: FED stays the course, DOW +42
Overnight all of the Asian markets were lower. Europe opened lower and closed -0.80%. US index futures were choppy overnight, and at the open the SPX hit the OEW 1090 pivot. In the first few minutes the market bounced to SPX 1094. At 10:00 New homes sales were reported lower: 342K v 370K. A few minutes later the testimony by FED A. Director Greenlee was released: http://www.federalreserve.gov/newsevents/testimony/DB30846625A148C687275420518A9D77.htm. The market headed lower, making new lows for the downtrend at SPX 1085 by 10:30. The SPX rebounded a bit to 1091, and then went into a small trading range until the FOMC statement around 2:15. FOMC statement: http://www.federalreserve.gov/newsevents/press/monetary/20100127a.htm. After the news the market immediately spiked down hitting SPX 1083, another downtrend low. Then just as suddenly the market spiked higher, hitting SPX 1095 by 2:30. After a pullback to SPX 1089 by 3:00 the market rallied to 1100 by 3:30. FOMC days are usually quite volatile after the announcement. The market then pulled back to close at SPX 1098. For the day the SPX/DOW were +0.45%, and the NDX/NAZ were +0.80%. Bonds slid 6 ticks, Crude dropped $1.00, Gold lost $12.00, and the USD was higher. Support for the SPX remains at 1090 and then 1061, with resistance at 1107 and then 1133. Short term momentum was oversold at today’s lows, and displayed a positive RSI divergence before turning higher. Tomorrow, the weekly Jobless claims and monthly Durable goods orders at 8:30. Don’t forget Q4 GDP will be reported on friday.
This morning’s push lower in the SPX cleared up the short term count. Wave 4 appears to have ended at SPX 1104 yesterday, and wave 5 was underway. After hitting SPX 1085 the market drifted along until the FOMC statement. A quick spike lower to SPX 1083, still within the OEW 1090 pivot range, appeared to have ended wave 5 and with it Intermediate wave one. Especially, after the market became sufficiently oversold and positive divergences appeared at the lows. The volatility of a FOMC announcement continued as the market immediately spiked up to a new high for the day. To confirm that Intermediate wave one has concluded the market needs to rally above the OEW 1107 pivot. This may not occur too quickly since FOMC volatility usually lasts into the day after the announcement. Should this market continue to unfold as anticipated. Intermediate wave two should take the form of an ABC counter trend rally, and retrace about 50% of Intermediate wave one to SPX 1116 or higher. When it gets sufficently overbought Intermediate wave three should then begin. State of the Union address tonight. Best to your trading!
MEDIUM TERM: downtrend
LONG TERM: bear market