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An Interesting Wednesday

Published on November 4, 2009

An Interesting Wednesday

November 4, 2009

So far, past two days’ rally effort appears to reinforce that this is more of a 2-5 days technical rebound that occurs post a 90% Down Day (Friday’s sell-off). Today, Dow is rallying over 100 points and other indices are not too far behind.  It remains to be seen if, post FOMC announcement, markets can sustain these levels.

There is apparent lack of volume over this week’s two sessions which is well below the sell-off volume on Friday, another indication suggesting that distribution days are increasing. All the major market indices dipped below, then kissed and are now bouncing above the 50days EMA. The short term resistance levels were at approximately 1060 for the S&P 500, 2080 for the NASDAQ Comp, and 580 for RUT. Only Dow has managed to hold above its short-term uptrend support of 50Days EMA.

Uncle Ben hardly has many choices to please markets to run north on steroid, post announcement. He will be keeping interest rates unchanged and market participants know that. How he views future will be evaluated critically. If he is keeping rates low again too far in the foreseeable future, the economy is still in poor shape. If he hints raising rates, markets won’t like it either. Bottomline, I personally have a bearish bias. Hope this is not one of those “Buy in anticipation and sell on News” days.

But in the end, there is always “what if”, what if markets rallies. Based on my past experience with FOMC announcements, markets tend to be very volatile during that moment. Pls trade very carefully during pre-n-post announcements and be very careful not to make decisions in haste. If you can’t avoid trading during that time, better, develop a “what if” risk management plan in advance so your actions are driven by a pre-planned game-plan vs emotion.

Profitable Trading, OP

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