Tuesday's rally is a clear sign there has been at least for now, a shift in sentiment. With the worst Consumer Confidence reading ever, the retail sector managed an impressive rally, not what you'd expect from a reading like that. It may be “the worst is behind us” effect or just an oversold market taking in some other good news along the lines of Fed liquidity and the suggestion the Bank of Japan may be cutting rates.
Another consideration sis the FOMC meeting today at 2pm. The market feels a 50 basis point cut reducing the Fed Funds rate to 1% is a given, however there is a 48% chance priced into the Fed Futures that a 75 basis point cut may be on tap later today. As a general aside, remember, typically in the past, the market's initial reaction to Fed policy has nearly always been wrong. The market takes a few days to digest and reevaluate and then makes a firm commitment. So don't be surprised to see some wild volatility around 2:30 today.
Also don't be surprised to see some early profit taking after yesterday's enormous gains. However, don't forget that the breadth, depth and scope of yesterday's rally suggests that something has changed, at least for now. We've been watching it on 3C and the NASDAQ 100 (QQQQ) charts. I hope some of you were buyers near $29.
In some other news, I've been working on a trading system that has thus far (and I'm not done with it) returned gains of over 120% on an annualized basis, tested on all NASDAQ100 components. It is a different approach to trading than we have taken here in the past and one that seems to be pretty darn impressive. If you want to run the test yourself and look at the results, sign up for the new StockFinder, which replaces BLOCKS. For existing Blocks users, the transition is seemleass, your premium services will automatically work in StockFinder.
Or check out the tried and true TeleChart, which I still use everyday as my main trading platform. When you sign up from one of my links, send me an email and I'll hook you up with my 3C indicator which you can see calling the recent accumulation on all of the QQQQ charts below.
Federal Reserve
Wednesday, October 29, 2008
FOMC Meeting Today
Posted by Brandt at 9:24 AM
Labels: Blocks, consumer confidence, failed rally, Fed, Federal Reserve, stock market, StockFinder, Telechart
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