Wednesday's focus will be upon the afternoon Fed announcement for interest rates and the corresponding statement. Typically the morning of a Fed announcement is decent for trading and more often favors the bulls. It becomes more difficult mid-day as volume dries up. Right now there is a strong technical bias in favor of a move lower following the announcement if the market holds up into the news release. A trend day is unlikely. Use caution trading the immediate aftermath of the event, however, since volatility will be high. Waiting several minutes for price action to begin to normalize can be well-worth it. The Fed news hasn't yielded the extreme post-announcement moves over the past year that we used to see before the Fed went into holding pattern, but the best moves to play after the announcement tend to be the secondary and tertiary reactions intraday on the 2-5 minute time frame. Last month the FOMC agreed to keep rates low until at least March of 2013.
S&P 500 (Figure 2)
The Dow Jones Industrial Average ($DJI) ended the day on Tuesday with a gain of 7.65 points, or 0.07%, and closed at 11,408.66. The top gainers in the Dow were Home Depot (HD) (+1.34%), Intel (INTC) (+1.23%), American Express (AXP) (+1.21%), and Travelers (TRV) (+1.04%). The weakest were Alcoa (AA) (-2.85%), Hewlett Packard (HPQ) (-1.92%), Bank of America (BAC) (-1.29%), and Caterpillar (CAT) (-1.11%).
The S&P 500 ($SPX) loss of 2.00 points, or 0.17%, and closed at 1,202.09. The top percentage performers in the index were Interpublic Group (IPG) (+8.26%), Celgene Corp. (CELG) (+7.14%), Newmont Mining Corp. (NEM) (+5.48%), and Carnival Corp. (CCL) (+5.05%). The weakest performers were Netflix (NFLX) (-9.54%), Coventry Health Care (CVH) (-6.83%), CH Inds. Holdings (CF) (-6.52%), Cliffs Natural Resources (CLF) (-6.44%), and Alpha Natural Resources (ANR) (-5.71%).
The Nasdaq Composite ($COMPX) ended the session lower by 22.59 points, or 0.86%, on Tuesday and it closed at 2,590.24. The strongest percentage gainers in the Nasdaq-100 ($NDX) were Celgene Corp. (CELG) (+7.14%), Cerner Corp. (CERN) (+4.32%), Vertex Pharmaceuticals (VRTX) (+3.73%), and Alexion Pharmaceuticals (ALXN) (+3.68%). The top decliners were Netflix (NFLX) (-9.54%), F5 Networks (FFIV) (-5.69%), First Solar (FSLR) (-5.60%), Illumina Inc. (ILMN) (-5.17%), and Joy Global (JOYG) (-5.17%).
Nasdaq Composite (Figure 3)
Unless otherwise stated, the index action described in this article relates to the E-mini futures contracts for the respective indices. Actual index action may differ slightly in terms of pattern formation, although the market bias will remain the same.
Toni Hansen is president and co-founder of the Bastiat Group Inc., DBA Trading From Main Street. Toni is one of the most respected technical analysts and traders in the industry. She has been trading and educating new traders, money managers, professional market analysts and traders throughout the boom and bust of the last decade. She has worked in conjunction with some of the world's top financial exchanges. Learn more about Toni Hansen and the educational services she provides through her website at http://www.tonihansen.com.