Chart of the Day: SPX Breaks Above 50-day Average

The S&P 500 Index closed above its 50-day average today for the first time since September 3rd. That's quite a time span. This was one of the technical conditions I was looking for to become more constructive on the market.

While the market could always pullback, and lately it has, I think the trend has changed such that the year-end rally should push the SPX back to the 1000 level over the next few weeks.




Today's rally picked up steam into the close. Here is what Briefing.com had to say about the rally, which sums it up pretty well:

As we stated at 11:19, expectations were relatively muted going into the Fed statement, with futures predicting a certain 50 to 75 basis point cut, which would have brought the Fed Funds rate down to 0.5% or 0.25%, respectively.

Instead, the Fed threw out the incremental rate cut playbook and instead issued a Fed Funds rate "target" of 0% to 0.25%, which brings it squarely in-line with where prevailing market rates had been (the effective fed funds rate, which is the benchmark overnight rate at which banks lend to each other, was 0.18% before the announcement).

This was an unprecedented move. Moreover, the Fed confirmed its new course of "quantitative easing", saying that over the next few quarters the Federal Reserve will purchase large quantities of agency debt and mortgage-backed securities to provide support to the mortgage and housing markets, and is also evaluating the potential benefits of purchasing longer-term Treasury securities.

The markets surged following these Fed actions, as investors viewed the Fed's action as ditching its incremental rate-cut approach and essentially coming out with both guns blazing, saying it would do whatever it takes to keep the economy from sliding further into recession.