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Wednesday, September 16, 2020

Interesting FED reaction 9/15

The FED was unimaginably dovish today.  They plan on holding interest rates at 0.1% through 2023.  At first the market reacted as one would expect by rallying.  SPX got above the 9/9 high, but reversed and sold off into the close.  Closing below yesterday's low leaves us with a bearish engulfing bar.


SPX was briefly above the 20 DMA, but failed sharply on an increase in volume.  The 20 DMA is now resistance.  The bulls have to overcome that line to get control.  This pullback has generated three strong tick distribution signals so far.

The green count (middle panel) crossed above 50.  SPX has worked off the oversold condition.  If the bears show up tomorrow they are still in control.  A strong up day should put the bulls in control if they can close SPX above the 20 DMA.

I find the FED's action today really disturbing.  I have been somewhat worried about fallout from the virus and rioting.  I think there could be a lot of businesses going out, especially in the retail and hospitality sectors.  We could see considerable stress in commercial real estate.  Does the FED also believe there could be severe stress?  I wonder if money managers thought as I do about the FED move.  It is common for FED induced moves to be retraced.  Sometimes the retrace happens the next day.  It is rare, but sometimes there are prolonged moves started by the FED.  Downside follow through tomorrow is likely to send SPX below the recent low.  If the bulls come out fighting and can get SPX above the 20 DMA, it should set up a test of the high.

Peace and good health to all,


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