Waiting on the Fed
By Paul Cherney
How much of Tuesday's expected rate cut by the Fed has already been discounted by Monday's price advance? The street is expecting between 25 or 50 basis points. According to the futures market there is about a 50-50 shot at 50 basis points.
The day of the FOMC meetings usually sees some activity in the first 30 minutes of trading, then a long spell (up until about 1:40 pm EST) when prices just meander sideways, usually unable to develop followthrough in either direction.
I have been expecting the current consolidation to see an exhaustion of buying power resulting in a rollover and a retest of the price range of Sept. 21 (S&P 500). An S&P 500 close over 1110.61 would force me to abandon concerns about a retracement and I would have to view the 1110-1052 area as support.
The S&P 500 finished Monday's session inside resistance which is 1101-1111. Above 1111, the next resistance is 1114-1135.52, resistance becomes thick with prints of 1123 and higher. The index has an important price support at 1052. A close below this level opens downside risk for a move to the next layer of support: 1022-1000. That is a "close below" 1052. I have had an overnight system which warning that a close below S&P 500 1085.61 would increase downside risk for a retest of the 1070-1050 area.
The Nasdaq has immediate support 1759-1726 then 1719-1683 with a focus 1717-1711. The index finished Monday's session at the upper edge of resistance formed on Oct. 26: 1767-1793.
The Nasdaq has major resistance 1782-1934. Resistance becomes thicker with prints of 1825-1887.
The DJIA has immediate resistance at 9400-9605.
The DJIA has critical support at 9014-8951.07.
Cherney is market analyst for Standard & Poor's