Wednesday, March 18, 2009

Technical Picture - Rally Extends - 50 SMA in Play

Markets were just modestly lower in early trade, with much of pre-FED trade in a tight, choppy range. The FOMC boldly announced that it will increase the size of its balance sheet further by purchasing up to an additional $750 billion of agency mortgage-backed securities and an additional $100 billion of agency debt. The Fed will also purchase up to $300 billion of longer-term Treasury securities over the next six months. This triggered a plunge in Treasury yields, a surge in gold and a broad based extension in the stock market with Financials pacing the way.

The NAZ outperformed closing above its 50 SMA. SPX surged into heavy resistance and the 50 SMA. As you can see from the extreme readings on the NAMO and Open Interest below, we have reason to believe the markets will correct over the very short term, but in a momentum driven market it's best to wait for the markets to signal. The correction could be shallow.

If memory serves me well, most post FED announcement days are narrow range as the markets consolidate the news.

The safe haven play in gold versus a weak market is done, but gold isn't done, because now gold will act as safe haven vs. a weakening dollar. The bold move by the FED underscores just how weak the U.S. economic situation really is. Gold likely to retest $1,000.

Financials are close to a full retracement of the Feb.-March slide.


Stewie said...

that CPC chart pretty much sums up whats happpening right now.

TJ said...

Yeah, so far today CPC has retraced 11 pts. back to 76