Major U.S. stock indexes, which enjoyed an afternoon rally following the Federal Reserve's decision to cut the benchmark U.S. interest rate by 50 basis points to 1.0%, turned lower in the final minutes of trading Wednesday. U.S. stocks dropped in the final 12 minutes of trading on concern that the Federal Reserve's sixth interest-rate cut this year isn't enough to rescue the economy. The Fed was saying that a recession is in place and that a global recession is unfolding.
"We are at the beginning of a very severe U.S. recession; it's going to be much more painful," New York University professor Nouriel Roubini said in an interview with Bloomberg Television. "There are still significant downside risks to equity markets and credit markets". Watch the video : Nouriel Roubini Sees `Significant Downside Risk' for Equities.
Here is a part of the Cobra's analysis, for the complete article, please visit his blog link on the related posts:
- The bad news is that we still have not seen two up days in a row since October. However the good news is we get several intermediate term buy signals. As far as tomorrow is concerned, the daily chart is relatively bearish but there is no sufficient evidence to predict the market will definitely pull back tomorrow.
SPY Mid-term Trading Signals
MACD, BPSPX, and NAMO are all buy signals, except for NYSI which is still not.
INDU leads the Market
It does not really mean INDU leads the market. What I mean is that, according to the chart in the recent one year, the progress of INDU is almost always ahead of other indices. Tomorrow INDU showed a higher high ahead of others, which is a good sign, and the next step is to see if other indices follow. By the way, while SPX and COMPQ were still lower lows, INDU clearly showed higher highs which is also a good sign.
With the aforementioned mid-term signals and two major accumulation days on 1.0.5 Major Accumulation/Distribution Days, the probability of mid-term rally should be relatively high. Should the market pull back, we will get more evidence according to how far the pullback goes.
Tomorrow the market might pull back, but I am not very sure.
CurrencyShares Japanese Yen Trust (FXY Daily)
As pointed out by readers, because there are so many gaps on FXY chart, gap down cannot be considered as an island reversal. This doesn't mean Yen won't pullback, it only says the terminology of island reversal isn't accurate.
Sources :
- Bloomberg: U.S. Stocks Decline as Fed Fails to Ease Concern About Economy, October 29, 2008 17:18 EDT
- Reuters: Fed slashes rates, again, October 29, 2008 01:24 pm EST
- Cobra's Market View: 10/29/2008 Market Recap: 3 intermediate term buy signals, October 29, 2008 10:01 pm
This is generally never true. Before buying or selling any stock you should do your own research and reach your own conclusion. See my Disclaimer on the bottom for more information.
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