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MV Weather Report: Fed Turns Sun Lamps on Market


Rain or shine, we review the day's biggest stock stories.

In a statement released today, the Federal Reserve said the recession is easing, but that it has no intention of suspending its aggressive attempts to revive the financial system. Which means that the target short-term interest rate will remain at zero for an "extended period," and that the Fed will continue to purchase Treasury and mortgage-backed securities.

So nothing has changed: The market rallied, and investors are happy. Well, sort of.

While the S&P 500 was up 2% today, after an initial thrust to 882 -- a new high for this rally -- the S&P sold closed 10 points lower, at 873. If I were a bull, I would have liked to see the market extend to 890 - or at least close at the highs of the day.

On the Buzz and Banter, Professor Jeff Cooper gave his take on the action:

"We got the spike we were looking for to satisfy a potential Broadening Top formation on the S&P daily and hourlies with a marginal new high for the move.

"Then the 10-minute traced out Train Tracks (sell signal) while it is poised to close below the breakout pivot today."

The chart pattern Cooper is talking about can be seen below:

Click to enlarge

When looking for a turn in the market, I like to look at the rally's leaders: In this case, Apple (AAPL), Research in Motion (RIMM) and Amazon (AMZN); the latter 2 both traded down today.

Could they be signaling the end of the run?

Here's an excerpt from Jason Goepfert's article, entitled A Breakout Would Be Good... Right?

"The last 6 times we had an FOMC meeting, the S&P 500 typically responded in joyous fashion, closing in positive territory 5 times, with an overall average of +2.4%.

"But a cruel fact of life is that the hangover is never as much fun as the party, and over the next 2 days, the S&P was positive only 1 time out of 6, with an overall average of -1.6%. It would average -2.8% without including that one winning trade, which happened to give back all its gains and then some within 4 more sessions."

As I stated above, if I were bullish, I wouldn't have liked today's action. The market has been slow and dry, and it's quite possible that today's action was mutual-fund mark-up day.

Heads up on Exxon Mobil (XOM) earnings before the bell tomorrow; it will shape the tape.

Have a great night!

In memory of our fallen friend and trusted colleague, Bennet Sedacca, 100% of the donations made to the RP Foundation through April will be channeled to philanthropic endeavors consistent with the RP mission, working closely with the Sedacca clan in the distribution of those funds. We thank you kindly for your support as we strive to effect positive change in the lives of children.
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Position in SPY option and RIMM

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