i won’t write a rambling commentary dissecting the fed’s statement and hypothesizing on all the potential consequences of pledging to extend the punch bowl of liquidity out for another two years. i only want to convey, that from my experience as a trader, the stock market’s initial reaction to the fed statement is not always the market’s subsequent reaction in the days that follow. sometimes it is, sometimes it isn’t. my only point is that the price swings in the days following fed announcements can be quite large, very fast (tough to get in and out of positions) and often prone to sudden reversals. personally, i like to keep positions sizes small and be a little more flexible/liberal on my stops than usual.
as of now, the SPY/SPX and NDX are breaking out above resistance. volume is slightly below average at this point but most days volume will increase into the close. a solid close today above those key resistance levels that i’ve highlighted recently does not remove any of the red flags but, as price action always speaks loudest, it does warrant caution on the short side.
last week i had mentioned that regardless of whether or not these resistance levels on the key indices was taken out, i would give it a few days to see if it sticks. well, since we just floundered around those levels since then until today, the same holds true again. i still urge caution on the long-side into the beginning of next week. the ideal bullish scenario, IMO, would be a solid break-out today with maybe a little more upside, then a pullback to re-test the recently broken resistance levels (now support), while consolidating for short-while in order to work off the near and intermediate overbought conditions. good luck and if you are unsure what to do here, keep it light or stay in cash. i will update the broad market charts later today, most likely this evening.