The FOMC report came out today, keeping rates unchanged as the Fed continues to buy into bonds, thus supporting the market going forward.
Both the S&P 500 (SPY) and the Nasdaq 100 (QQQ) closed green on the day, with the QQQs breaking new all time highs from their recent tumble on Wednesday the 9th. In addition, the Russell 2000 (IWM), along with the Dow Jones (DIA), pulled back from the day's lows.
No surprises out of the FOMC. The Fed remains steadfast on the notion that inflation is under control. But have you seen corn, sugar, soybean and industrial prices lately?
Gold finally perked up. It's possible that the gold miners have a double bottom in the making. Plus, oil is holding as well. As far as the Fed goes, oftentimes the next day we see a reversal from the initial price reaction. Plus, Friday is triple witching day.
Keeping this in mind, a good rule of thumb to get a better picture of the Fed's involvement is to look at High Yield Bonds (higher risk, JNK) and Investment Grade Bonds (lower risk, LQD), as the relationship between the two can help us better see the market's appetite for risk. Plus, keep your eyes on the 20+ year long bond TLTs, as they closed basically unchanged with a move over 159 - interesting.
For more on the outliers, watch Mish's new Your Daily Five video on this and more.
JNK has been in a bullish phase ever since it crossed the 50-day moving average DMA back in early November. So far, it's been steadily closing over the 10-DMA, which proves it's still holding strong in the market's uptrend.
LQD, though not as perfect as JNK, is still over the 50-DMA and has resistance at 138 to clear. It also has a fair amount of support underneath it from around $135-137.
Watching these hold their bullish phases as the market moves forward into 2021 gives security that money is still flowing into high-grade corporations, as well as businesses with higher risk.
Perhaps it is just buyer's fatigue getting to us, but we are hearing constant fear out there that one day the party will crash and burn. Maybe. But for now - and keep in mind stimulus is still a dangling ball - we have our bonds, gold, dollar and yes, even volatility to give us a head's up when the breadth begins to deteriorate.
Please join Mish, Samantha LaDuc and Sang Lucci at 4PM ET on Thursday, December 17th for a discussion on women and trading-sharing stories, the ups and the downs, plus what has changed in the last 2 years.
- S&P 500 (SPY): Broke resistance, but needs a close over 371.05 with 366.74 support
- Russell 2000 (IWM): Digesting recent highs
- Dow (DIA): 298.68 support. 303.80 to clear
- Nasdaq (QQQ): New all-time highs
- KRE (Regional Banks): Resistance 200-week moving average 52.70 to clear. Support 48.48
- SMH (Semiconductors): 221.79 high to clear. Support 210.41 if cant hold 10-DMA at 216.57
- IYT (Transportation): 10-DMA 223.20 to clear. 217.63 is key level to hold
- IBB (Biotechnology): 152.13 pivotal level to hold.
- XRT (Retail): 59.24 support. 62.75 high to clear
Mish Schneider
MarketGauge.com
Director of Trading Research and Education
Forrest Crist-Ruiz
MarketGauge.com
Assistant Director of Trading Research and Education
