Holy cow! The technical ceiling was finally destroyed today as the bulls stampeded over the bears and ignored all negative signs and warnings of slowing growth. The housing numbers were really not that great, but who cares. Once resistance was taken out, confidence came in. The obvious sign of confidence today was the big move in micro caps – generally the most risky area to place your money.
Don’t forget, even with this move, the fundamentals are still so-so. My opinion is that today’s move was a technical move with short covering over the 1130 range on the SPX. With that in mind, I only kept a few stocks in my portfolio overnight (CPE, ATPG, and JASO). If this breakout is really nothing more than a fake-out, then I expect we’ll pull back to the 1129 range and/or consolidate in this area. If the market attempts to continue the rally, the next resistance level is at 1150.
If you’re a technician, then there are two obvious standouts on the charts – we’re over bought (not hugely) and we broke through resistance – now we watch to see if resistance becomes support.
Tomorrow’s biggest news event will be the FOMC Meeting Announcement at 2:15 Eastern. My assumption is that we won’t see a lot of movement in the markets ahead of this release… if anything, I would look for a little bit of profit taking – we’ve been on quite a run. The FOMC Meeting could put the fire out of this move or give it juice to keep going. Manage your risk headed into lunch accordingly.
“The FOMC announcement for the September 21 FOMC policy meeting is expected to leave the fed funds target rate unchanged at a range of zero to 0.25 percent. The big question is whether any additional quantitative easing measures will be announced. Also, analysts look for signs of dissent over the timing of changes in the Fed’s balance sheet as well as the size of changes and even the planned composition of assets (mainly Treasuries versus non-Treasury assets).”
I’ll have a follow-up post later with a few chart setups.