So, the Fed holds rates unchanged and the market rallies, as explained by this article from Reuters. According to this article, “The Fed, which also left interest rates unchanged at a policy meeting, buoyed the market by reassuring investors that problems in mortgage lending and corporate finance would not drag on the broader economy.” Hmmm…is it all really all that simple? So, why did the market dip to day low, before finding the “right” direction to go?
In fact, “this” happens a lot when there are no surprises from the Fed. (By “this”, I mean that the market first goes the “wrong” direction, and then, turns around quickly and go the right direction.) Most people expected the Fed to hold the rates steady. So, why didn’t they react right away and let the market go up more? Why did it have to come down first? Manipulation? No, you don’t say! Could it be that if the market had continued to go up right when the Fed announced its decision, it might have jumped too much and get ahead of itself? Are the big traders “somehow” guided by technicals?…and, is there some level of “control” beyond the fundamentals? No, you don’t say!
Let’s expand a little more on “the technicals”!
SPX
SPX had tested 1440 and it held up. Yesterday, it closed above 1460. These are the support range levels that we’ve been looking at since 7/26. Now, the chart shows that the MACD is turning up. These are signs that show the strength of the support.
I’ve also been pointing out that the VIX is very high!
VIX
VIX today closed below its 10-day MA. The MACD is just starting to come down. In the past 10 years, VIX had always gone up when the market is down. But, when VIX peaks and starts to slide, the market goes up. When VIX stays steady, the market continues on an uptrend rise.
So, why am I pointing this out? Like I’ve been saying for a few days now, I think that VIX had gotten too high, ahead of its technicals, and it needs to come down. This translates to “It’s time for the market to bounce”!
Also, check this out:
SPX (monthly, 5 years)
Even after 3 weeks of decline, when you take a broader view, this market is still in a healthy uptrend! SPX is still above its monthly MAs, and the monthly MAs are in a healthy bullish formation! So, if the above mentioned support level holds, and the market goes back up, these 3 weeks of decline becomes another healthy correction!
Let’s just do a quick market recap:
SPX closed at 1476.71, up +0.62% (support range: 1440-1460)
Nasdaq closed at 2561.6, up +0.56% (support range: 2550-2575)
Dow closed at 13504.3, up +0.26% (support range: 13200-13400)
Over in Asia, Hong Kong is up +346 points; Japan is up +152 points; and China is down slightly, -3 points. Looks like Asia likes what it saw in the U.S. market! Let’s see how they all close when we wake up in the morning.
So, what does all this mean? We’ve been holding cash and been patient and cautious. Do we jump in and go “all-in”? No, of course, not! All I’m saying is that fundamentals are important and techincals are useful, too! Combining them can make us better investors/traders. I would still be patient and wait for the market to re-confirm the uptrend. But, meanwhile, it’s good to make some good, profitable, light trading:
We had a great day today, as WYNN gave us huge profits:
WYNN Sept105 calls, UWYIA, at avg. $15.75, +392%
WYNN Sept 120 calls, UWYID, at $9.8, +25.6%
WYNN Sept 120 calls, UWYID, at $9.5, +22% (see Happy Trades!! for more details)
These trades made our members “happy”, as I exchanged the following conversation today with one member:
ash
Posted August 7, 2007 at 8:52 am | Permalink (Edit)
happy
wynn just paid for my subscription. Thanks.
HappyTrading
Posted August 7, 2007 at 9:04 am | Permalink (Edit)
Ash
for the whole year I hope! =)
ash
Posted August 7, 2007 at 9:08 am | Permalink (Edit)
Happy
for the whole year.
After the market, CSCO report good earnings with profits that jumped 25%! Its shares were up +5.73% in AH. PCLN’s shares jumped more that +10% with earnings that more than doubled!!
Good night and HappyTrading! ™
