The Good And Bad News About Tuesday’s Rally
Before I get into the technicals of the market,
I am going to talk about “WHY.” I never usually talk about why something
happens because I only care about “WHAT” happens.
The FED became inflation hawks today…simple as
that. They stated that odds of faster rate hikes has increased, dropped
balance of risk opinion and overall changed their pace from measured to
urgent. That lit the bond market on fire. How can the bond market
rally…which in turn lowers long-term rates…when the FED is raising
rates? BECAUSE the market believes the FED is finally on the ball and will
not let inflation get out of hand…calming fears. The bond market
rallied…thus the stock market rallied…and in the nick of time. Why do I
say in the nick of time? Time for the charts…and I have some definitive
areas of support. Pay attention.
Most major indices were on the cusp of breaking
down into new territory…simple as that. The DOW was ready to break
10,360… The RUSSELL was ready to break 603…the NASDAQ and NDX were
falling off recent support. Even the strongest index, the S&P was headed for
vital support at 1163. Draw your lines in and around today’s lows. Look how
some held to the penny.
^next^
So now what? I have taught you for years what
reversals–both positive and negative–mean. Forgetting why…the “markets”
reversed a breakdown on heavy volume indicating anyone who wanted to
sell…sold…and into the morning’s drop. Sellers simply dried up. Buyers
got the upper hand. Usually, this will lead to some upside testing/follow
through…usually. While today’s action was a definite positive as the
market put in a goal-line stand, all the issues the market had before today
are still around.
The main problem is that there remains a ton
of overhead resistance and a ton of damage that needs to be repaired. The
good news is that today’s action gives the market that chance to repair the
damage.
Other notes:
With BONDS soaring, HOUSING and other
INTEREST-RATE sensitive names finally showed a strong bid. This area will be
key if the market is going to have another decent leg up. They have been
acting miserably recently.
OILS continue to consolidate. I would continue
to lay off this area during this time of hibernation.
Lastly, I told you at the beginning of this year
that things are going to get tougher. Little did I realize how tough things
would actually get. I was almost hoping for a breakdown today…only because
I am sick of the nauseating trading range that continues…no fun. Give me a
bear…I am happy…give me a bull…I am happy.
to hurdle 10,568 and the S&P above 1192…where it will come up against its
50-day average.
Gary Kaltbaum