The Fed Speaks

End of Day Analysis:

Another volatile, but ultimately uneventful session. While the spread between the day’s high and low exceeded 20-points, we ended down less than three.

The headline event was the Fed’s policy statement and ending of QE. This was widely expected, but they also removed language about considerable slack in the labor market. To many this implies a sooner increase in interest rates and was enough to send the market into a quick, 10-point selloff. But rather than cascade lower, supply dried up near 1,970 and the market bounced, nearly recovering all the day’s losses by the close.

The dip tested 1,970 support and the 50dma, but we held both. This is encouraging and gives credibility to the young rebound. If the market was teetering on the edge of another emotional plunge, this weakness more than enough of an excuse to set it off. But instead of rushing for the exits, most owners were indifferent and that apathy tightened supply, leading to the late bounce.

While holding 1,970 is encouraging, we need to keep a close eye on these levels in coming days. If we slip under 1,950 by Friday, things could get ugly in a hurry. But close the week above 1,970 and the market is moving past the fear and uncertainty that gripped us in the first half of October.

Jani