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Market Recovers from Fed Minutes-Inspired Losses


Today, when we say the S&P closed flat, we mean it literally.

We often report that the market closed the day flat, and that usually indicates a negligible loss or gain. But today, when we say the S&P closed flat, we mean it literally! The index closed unchanged, while the Dow (^DJI) and Nasdaq (^IXIC) slumped to a loss. Wednesday's action was typical summer chop, although the action heated up in the last two hours of trading after the release of Fed minutes. They contained no game-changers, and perhaps were even more hawkish than expected, but the market was able to limit the damage after an initially strong sell-off.

Overall, the action feels much more bearish than bullish at this point, with a lot of broken charts out there. Momentum stocks continue to weaken, which is always a negative sign. The precious metals saw an initial spike lower after the Fed minutes were released with little mention of QE3, but were able to erase losses with pit trading closed. It will be key to watch how they react tomorrow.

Lululemon (LULU) is an example of a former market darling that continues to be punished for lowering expectations at its last earnings report. The stock closed the day down 3.5%. Chipotle (CMG) is another that looks to have a similar ascending triangle/bear flag pattern, although it held up better today.

Facebook (FB) continued to the downside, but bounced in the last hour to hold its 20-period moving average and a key support level. $30.55 is the key level to watch, and until we get a close below that area I will stick with my FB long thesis.

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Scott Redler is long SPY puts and FB.
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