Economic analysts are expressing mixed opinions today about yesterday's "about-face" turn of the Federal Reserve from hawkish to dovish in their stance on interest rate hikes. Some are complaining that this abrupt change shows that the Fed is caving in to market pressure (and perhaps even to criticism from President Trump) and erodes the Fed's credibility. Others are saying that the "data-dependent" stance of the Fed is appropriate given today's highly volatile economic environment. One particular analyst expressed the concern that if this bad news about the economy is good news for the stock markets then we are just "kicking the can" down the road and may be postponing a correction in equities that is now overdue. That correction could be more severe if delayed. I tend to agree with this last point, but it's still a little too early to judge the full impact of yesterday's dovish cooing on equity markets.
After yesterday's 400 plus point gain, the DOW dropped 150 points this morning but then crept back up to close the day with just a 15 point loss. Significantly, its close at 24,999 did not break the 25,000 "psychological resistance" level and was also still below our stop loss point of 25,100. The S&P 500, however, did break our 2,700 stop loss line (closing at 2,704) so some traders may have already covered their short positions. This is fine as we are now at a high risk for a strong market rally propelled by yesterday's dovish rhetoric from the Fed. Nevertheless, we are still in a reversal zone (although a weak one), resistance in the DOW seems to be holding, and tomorrow is Friday. I am going to wait and see if the week can close below our stop loss (resistance) lines. If not, I will probably cover my short position in the broad stock market. Holding my short position for now.