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Dow Stumbles, Doesn't Fall


Rumors, rate cut led yesterday's decline, but market shows signs of strength.

Let's Call it a Win Anyway

I'm not surprised the market became a whirlwind after the Fed rate cut was announced yesterday. That kind of reaction is old hat even in calm environments. Actually I though the swings would be wilder. Sure, it's a little disheartening that we didn't have two up days in a row (talk about buy signals) but we could almost put an asterisk on yesterday's session.

A rumor that General Electric (GE) was going to cut its outlook or something to that affect sent stocks tumbling. Apparently a loose lip at a dinner party made its way halfway around the world and hit the market like a wayward Scud missile. If not for that, there is a slim chance the market could have been higher, but 74 points on the Dow is enough to make one want to break out the party hats.

I like the way the market is acting this week. I like the way corporate earnings are coming out; bad news to be sure, the kind of news that justifies the current meltdown -- not yet. It's not even close to warranting the carnage. I realize it's going to get worse but right now I'm hopeful. Soon I think I will be emboldened. I'm convinced on the fundamental side of the ledger but need confirmation from the charts and volume.

The S&P 500 slipped a bit and kept the trend of lower highs going. That isn't a good sign to be sure. The technical buy signal everyone should be spying is a close above 1,020 on better-than-average volume. From there the index could rally further to 1,080 then 1,170, which is a major resistance point on the long climb back.

Click to enlarge

It looks like a plan to help homeowners is on the verge of happening. Several sources say $50 billion will be used to backstop $500 billion in loans to 3 million homeowners to rework their rates to lower payments for a five year period. I would suspect this will be solidified by the end of the week. There is a sense of urgency.
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