Wang’s Happy Trading

So, the Fed slashes the rate by another half-point, to 3%! This weekend, in my Market Forecast, I said,

“Of course, the Fed’s rate decision on Wednesday will continue to affect the market’s mood. I think, at the very least, another quarter-point cut is coming. A half-point slash would probably excite the market.”

On 1/22/08, I said,

“The initial bounce will need to take SPX to 1375-1410 (the 2 resistance levels above 1320). Then, we’d probably need a test of some sort before calling the bounce ‘real’.”

Well, the market was certainly “excited” right after the rate cut was announced. The Dow rallied up +200 points within an hour after the announcement. SPX reached above the 1375 level, at a day high of 1385.86. Then, things turned, and turned fast, after some cautious remarks from Fitch Ratings on bond insurers. This market is so nervous right now, it has been behaving like a teenage child with ADD (attention deficit disorder) for the past week. It has a hard time to keep going in the same direction for more than a few hours.

The Dow closed down 37.47 points; SPX lost 6.49 points; and the Nasdaq fell 9.06 points. So, now that SPX has reached above 1375 and could not hold it, is the market ready to test the recent low? Well, let’s take a look:

BTK (biotechs) was down 1.47%. OIH (oil services) lost 2.87%, while USO (oil) was flat. GLD (gold) and GDX (gold miners) both made gains. PBW (clean energy) fell 1.42%. MOO (agriculture) was also weak, losing 2.32%. FXI (Chinese ADRs) slumped another 4.66%.

SPX

SPX lost 6.49 points to close at 1355.81. It went above 1385, but, failed to hold on to the gains and closed, once again, below the 1375 level. The MACD difference (blue bars), however, has turned positive.

Nasdaq

Nasdaq fell 9.06 points to close at 2349, just below the 2350 level. It managed to stay just above the 10-day MA. Its MACD difference also turned positive.

It is difficult to say whether the market is ready to test the recent low at this point. SPX stayed above the 10-day MA and the MACD difference turned positive. If it gets above 1375 again, it might need to reach that 1410 level before testing the bottom. If it penetrates below the 10-day MA, it is more likely to be on its way to test the lows, which would probably find support in the 1300-1320 region.

After the market, AMZN reported a 4Q profit that more than doubled, but, its profit margin did not impress the investors. AMZN shares fell sharply in AH trading, down 12%! There are lots of earnings tomorrow that may affect the market’s mood. MA is reporting tomorrow morning before the market opens. It has bounced back to the $190 region from the recent lows of under $170. If it reports well, we could see it above $200 again; if not, it may be back to testing $170. ISRG has fallen about 40 points in the past 2 days (from nearly $280 last Friday to $235 today), after an unfavorable comment on the company’s growth from Oppenheimer & Co. ISRG reports tomorrow after the market close. Then, there’s Google (GOOG). With the present market psychology, GOOG’s report probably needs to be all positive, plus a little more, to inspire a positive reaction. Above $560, the immediate resistance on GOOG is between $600-$625. Below $560, the support comes between $500-$525. GOOG also reports after the market.

Good night and HappyTrading! ™