The Fed finally decided to taper and the markets are reacted in a big way. Note that the Fed merely reduced its quantitative easing from $85 billion per month to $75 billion. It is, however, a start that marks a change in Fed policy. I think stocks were just waiting for the Fed policy statement and news conference to pass. The outcome was not really important because analysts were split on the possibility of a December taper. In any case, the news is not what is important here. Instead, the market's reaction to the news is what is really important. Stocks were volatile just before and after the statement, and then surged in the final ninety minutes of trading. Large-caps led the way as DIA surged 1.88% and SPY gained 1.71%. Financials and healthcare led the sectors with 2+ percent gains. Home builders led the industry group ETFs as the market reacted to strength in housing starts and building permits. It is particularly interesting that interest rate sensitive issues also gained on Wednesday. The Utilities SPDR (XLU) was up 1.33%, the Telecom iShares (IYZ) surged 1.1% and the REIT iShares (IYR) was up 1.76%. Gold weakened after the announcement. Gold and silver are getting slammed this morning as the new QE reality hits home.
**This chart analysis is for educational purposes only, and should not
be construed as a recommendation to buy, sell or sell-short said securities**
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Key Reports and Events (all times Eastern):
Thu - Dec 19 - 08:30 - Initial Jobless Claims
Thu - Dec 19 - 10:00 - Existing Home Sales-Nov
Thu - Dec 19 - 10:00 - Philadelphia Fed
Thu - Dec 19 - 10:00 - Leading Indicators
Thu - Dec 19 - 10:30 - Natural Gas Inventories
Fri - Dec 20 - 08:30 - GDP - Third Estimate
Charts of Interest: Tuesday and Thursday
This commentary and charts-of-interest are designed to stimulate thinking. This analysis is not a recommendation to buy, sell, hold or sell short any security (stock ETF or otherwise). We all need to think for ourselves when it comes to trading our own accounts. First, it is the only way to really learn. Second, we are the only ones responsible for our decisions. Think of these charts as food for further analysis. Before making a trade, it is important to have a plan. Plan the trade and trade the plan. Among other things, this includes setting a trigger level, a target area and a stop-loss level. It is also important to plan for three possible price movements: advance, decline or sideways. Have a plan for all three scenarios BEFORE making the trade. Consider possible holding times. And finally, look at overall market conditions and sector/industry performance.
