The Federal Reserve saved the day with its policy statement at 2:15pm Eastern Standard Time today. Although the initial reaction the statement was VERY negative stocks were so oversold a rally ensued pushing the market to close near the highs of the session. Early in the session saw stocks drop to fresh new lows, but buyers stepped up to help find positive territory by lunch time. Sellers took over prior to the Fed statement, but their efforts would be thwarted by buyers at the lows. The damage has been down, but it appears there is a high probability of the market moving back towards the 50 day and 200 day moving average over the next one to three weeks.
At some point the market was going to get a relief rally. We were at some deep oversold levels we were bound to get a snap back rally. Volume wasn’t overwhelming high which calls into question the validity of the the snap back rally. Normally, we would see a flood of volume, but perhaps yesterday’s massive was the volume. No more guessing, if this is a new market rally we’ll get confirmation over the next fewe days whether or not we can get a new confirmed uptrend. However, odds are not in favor as the indexes important averages 50 dma and 200dma are nearing a death cross. A snap back rally into these moving averages is not out of the question.
What to do from here is a great question. We’ll be hunting for some longs, but at this point the picture remains bleak. Strength simply doesn’t exist here unfortunately. In addition, we’ll be looking to get after the market leaders who have broken down over the last few days and weeks. These are the best types of stocks to short. Shorting is a difficult game, so if you haven’t made money on the long side, stay away from shorting. In the meantime, stay patient and avoid being a stock market hero.