Mr. Market has a new Best Friend!

The FOMC will release their interest rate decision and policy statement today at 2:00 PM.

There is no follow up press conference scheduled today. The odds of an initial interest rate hike at this meeting are very near zero, leaving markets to parse the committee’s assessment of the economy for hints toward the likelihood of a rate hike at their next meeting, in mid September.

Monday recap:   US Equity Markets snapped a 5 day losing streak as Major Market Averages gained + 1% to +1.25%. Volumes were brisk as Investors and Traders continue to digest 2Q earnings, mid way through the heaviest earnings reporting week of the quarter.

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The calendar was arguably the markets BFF this week, with the FOMC policy statement at 2:00 PM this afternoon, and the last day of the month on Friday.

Mr. Market has an impressive record of posting sharp stock market gains the day before and/or the day of an FOMC policy statement, and what better way to salvage a losing month than putting the FED front and center 2½ days before month’s end.   

The DJIA and NASDAQ each gained +1%.  The NASDAQ at 5089 regained its 50 day MA and has now been above the 5000 level for all but 7 days since May 13.  The DJIA at 17,630 admittingly is an ugly looking chart, slightly less than 1% below its 200 day MA.

The S&P 500 at 2093.25 +1.25% outperformed as the beaten up oil and energy stocks posted some of the sharpest gains of the day with the Oil  Service and E&P sectors gaining 3%+.

Oil prices did have marginal gains by day’s end, but the stocks rallied much more than the commodity.

Stay tuned on this.

The DJ Transports at 8278, +2.7% had it strongest point and percentage gain in 6 months and is poised to break above its 50 day MA for the first time since March.  Monday was the 3rd time this month that the DJT traded below 8000 intraday only to recover and close that level.  I’m sure buyers yesterday ran the gamut of short covering, and value buying.

The 50 day MA at 8317 is well within reach for a sector that throws down 100 point moves like tic tacs.

At the risk of being a spoil sport, we have to take a close look at Market Internals, as that’s been the real story the last 4 to 6 weeks.   The adv/decl stats Wednesday ran at  2.5 to 1 positive on NYSE and 1.75 to 1 NASDAQ.  For a market solidly in the green all day that finished with 1% to 1.25% gains, I would have expected a stronger reading, particularly on NASDAQ.

UVOL/DVOL put in a much better showing with positive readings of +6 to 1 on NYSE and +3 to 1 on NASDAQ.  We’ll watch closely to see if the Adv/decl stats can broaden out if we get a couple more up strong days this week.

The other caveat is that the strongest sectors Tuesday were those that have trailed the market horribly the last few months.   In addition to Energy and Transports which we previously mentioned, Materials and Industrials had very strong gains while Financials and Utilities underperformed.

Conventional wisdom used to be that Financials needed to be in a leadership role for a sustained market advance.

Yesterday was just 1 day, so we’ll give it a bit, although I do think there is shift among investors mindset toward Financials as a more defensive sector than they have been for at least the last couple decades.

The Early Line:  Equity futures are pointing toward a modest follow through to yesterday’s rally.  Pay particular attention to market breadth and where the leadership is coming from if we do get another day long rally.

Twitter: @TJAnderson1


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