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Wednesday, April 29, 2009

The FOMC Slips Into Irrelevancy

"Information received since the Federal Open Market Committee met in March indicates that the economy has continued to contract, though the pace of contraction appears to be somewhat slower." Thus began the FOMC statement today, which had negligible effect on the market. There was a little volatility right after the announcement, and a brief rise to 782, before the final drop in the last half hour. The Fed appears to be becoming irrelevant, as they are seriously out of ammunition. Despite that, the SPX still has a bullish tint to it, as CMF continues to climb, and is now just below the level at the December peak. 867 seemed to be the pivot point today, as 877 provided resistance *except for the brief push above, the "bull trap" I mentioned this morning) and 857 was pretty strong support.

The Nasdaq broke out of it's range and appears to be headed for a test of the 200dma. CMF is now above the December peak, and may be indicating overbought conditions, but there really isn't any indications of massive selling on strength - yet. Price relative is flattening out again, so we may be headed for a pullback soon.

The Russell 2000 is also at a new high (for this up trend) and so has a new trend line. This one is still steep, but may be sustainable for a while. Price relative has broken out again, MACD histogram is positive, but still looks like it's going to flip soon. The only question is, does it do it before or after hitting the 200dma?

UUP is the ETF that tracks the dollar index. I prefer to do TA on the underlying index rather than the ETF chart, but stockcharts is late in updating the dollar index chart. I'm not sure what effect the Fed was trying to get her, but it took a shot up right after the decision, and never really came back down, so the late selloff in the market was not much of a surprise.

Bernanke is still making noise about buying treasuries. I don't think the bond market is buying it this time. The TNX went through a consolidation after bouncing back from the December drop, and broke out of it today.

From the statement:
"In light of increasing economic slack here and abroad, the Committee expects that inflation will remain subdued." Understatement of the decade.

I will have the new highs update slightly early tonight, and will be off the internet totally until either very late tonight or tomorrow morning.

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