The broad stock market rallied sharply early this morning then fell with equal gusto into the afternoon after Federal Reserve Chairman Jerome Powell stated that current economic circumstances do not justify any changes in interest rate policy (i.e. no intended cuts for most of this year). Many investors were hoping the recent coronavirus's negative impact on equity markets would encourage the Fed to at least hint of another rate cut this year. It did not, and equities gave up most of their early gains by the closing bell.
The DOW's morning rally lifted it, along with the S&P 500 and NASDAQ, to new all-time highs so our intermarket bearish divergence signal (which we got yesterday) is now negated. That was our stop loss signal for any trader still short in this market (like me), but the market's bearish fall after the Fed's announcement made me reluctant to cover my short position today. It is still possible for a reversal now (we're still in a reversal zone through Thursday) despite the DOW's new high, but it's also possible for this market to rally some more into the last week of February or even the first week of March before taking a serious correction. For anyone (like me) still short, let's see if the momentum of today's downturn continues into tomorrow. If it doesn't, we may cover our short position and wait to let this cycle clarify its direction. (As I mentioned yesterday, the DOW and S&P 500 may have already started new cycles on Jan. 31. If so, they could be very bullish now). Still holding my short position in the broad stock market.