Wednesday, September 23, 2009

As expected and previously posted on this Blog the Daily has done a classic reversal pattern on FED Day. Yes , we all know about the "Fed Pattern" which is not as reliable as we may like it to be.

The Ouside Day and Bearish Pin Bar Reversal on the Daily after a new contract High however is a much more reliable SELL Signal to be highly trusted. The S&P500 closed under the UP Trend Channel Support 1062.60 today which is another Omen for the big Index. It has closed under the 20 Daily Moving Average twice before in August and September and both times it has reversed within two days. Therefore to be a true continuation of the Weekly Downtrend it would have to go down to the 50 DMA at 1008 and close below it without reversing.

What about Volume? Today's volume output on the S&P 500 amounted to 4,332 million shares, which is roughly in-line with the index's average daily volume output seen over the past three months. The E-Mini Volume today was 16% less than yesterday.

We can expect prices to go down to at least 1035 (1042 on the SPX) if not lower. My trade is to SELL at 1062.

It appears that the Federal Reserve gave investors a good excuse to take some profits off the table. In a fairly typical 'buy-the-rumor-sell-the-news' reaction, the market ran up to new 2009 highs ahead of the FOMC meeting today. Roughly half an hour after the news was released, large market players decided to books some profits; after all, the major indexes are now up close to 60% in a mere six months and another earnings season is approaching.

The Fed's policy statement contained nothing truly unexpected. It reiterated that economic activity has started to increase and revealed that the Fed would leave interest rates (i.e., the Fed funds rate) unchanged (in a range between zero and 0.25%), possibly 'for an extended period'.

The Fed further announced it plans to purchase $1.25 trillion of agency-backed securities, as well as acquire $200 billion of agency debt. Other liquidity-boosting measures will be trimmed back, such as the $300 billion of long-term Treasuries (to be completed by October)

Two further signs of a strengthening US economy: Ford reported that it anticipates vehicle sales to be on the upswing; General Mills reported better-than-expected earnings and issued upside guidance.

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