WEDNESDAY'S MARKET WRAP-UP
Good day! The market spent most of the session on Wednesday in a holding pattern. After two strong days of buying with little left to move the markets ahead of the afternoon FOMC announcement, the indices wavered between positive and negative territory until the afternoon release of the Fed's current stance on interest rates and outlook.
The futures were lower in premarket trade after pulling back off highs on Tuesday afternoon. This path had continued into the early morning hours on Wednesday, forming three clear-cut moves lower on the 15 minute charts, although the overall pace of the correction was substantially slower than the rally on Tuesday morning. This pullback ended at support at 6:00 a.m. ET and buying began to creep back in. The corrective channel broke soon after the opening bell.
As I mentioned in yesterday's outlook, a false attempt to push higher was quite possible on the 15 minute charts heading into Wednesday, but we were unlikely to see a strong move. This was indeed the case. Even though the market made an attempt at Tuesday's highs, the zone of resistance at that level held extremely well. This was also that 20-day moving average zone that we've been watching for larger daily resistance.
Dow Jones Industrial Average (Figure 1)
The attempt at prior highs created a reversal pattern on the 15 minute charts as a type of double top, but the pace of the buying was still strong compared to the correction afterhours on Tuesday and into the early morning on Wednesday. This allowed the market to form a smaller double top intraday just prior to the Fed announcement, which left the market poised for selling even before the news was released.
The market didn't have a sharp reaction to the Fed's unanimous decision to leave interest rates unchanged at 0%-0.25%, but investors seemed to want a bit more encouragement than the Fed was willing to offer as QE2 winds down in the days ahead. Essentially, Fed Chairman Ben Bernanke admitted that they really don't know what to expect in terms of economic growth from this point forward due to weakness across so many sectors of the economy. He stressed that time will tell and keeping an eye on current developments as the year progresses will help determine further policy decisions. Right now they are basically in "wait and see" mode.