The correction didn’t end today, but buyers stepped up with volume behind them. Stocks set a new low for the current correction after New Home sales unexpectedly slowed in December. Selling pressure slowed as traders began positioning themselves for the FOMC rate decision. The market appeared to have support at these levels NASDAQ 2200 and S&P 500 1086. After the rate announcement the usual lackluster trade followed for the first 30 minutes before buyers stepped up and pushed the market higher. Today marked the first day of an attempted rally.
The current correction for the S&P 500 is 6% and while we’d like to see a deeper, longer rally today’s volume shows buyers are willing to pay up for stock. This attempt at a rally may very well fail, but the ones that fail will not have the type of volume we saw come into the market today. At this point new longs are still a bit risky, but shorts should not be taken. If this market is to follow-through we’ll see it come next week on Monday through Wednesday. Do not get over-excited here as this is premature and until we get a follow-through day this may be all for naught.
Another key level we’ll need to have the NASDAQ and S&P 500 clear will be their 50dma. The 50dma is a key level because majority of money made during uptrends occur when price is above the 50dma. We are nearing these key moving averages, but still remain below them. Odds are when price exceeds the 50dma you have the best chances on the long side.
In last night’s commentary I mentioned we were seeing long setups. Today showed why we were seeing long setups. The move in the market today showed that we have underlying strength. If we were blind bears like Elliot Wave Pretcher we would have missed long opportunities recently. Forget opinions and go with what the market rather than fight it.
Go get ’em.
