The Price Action Lab Report includes a market recap and premium analysis and it is delivered daily before the market open. The premium analysis focuses on high probability setups in ETFs and S&P 500 stocks. Click here for more details.
Market Recap – December 17, 2014
U.S. stock indexes rallied on Wednesday after receiving expected support from the Fed. The S&P 500 gained 2.04%, NASDAQ climbed 2.02%, the Dow added 1.69% and the Russell 2000 soared 3.11%.
Bond prices fell with the 10-Year Note yield rising 8 basis points to 2.15%. Crude oil prices took a breather with the spot price gaining 0.5%. The US dollar rallied versus the Euro to $1.2329. Precious metals prices were mixed despite the US dollar rally. In the spot market gold fell 0.5% but silver gained 0.2%.
Comments: A number of overbought conditions in equity related indexes and ETFs vanished yesterday due to the rally. Russell 2000 had its best performance in 3 years and the S&P 500 had its best gain since October of last year. Bulls may try to move the market higher while overleveraged participants are taking a breather. But uncertainty is still high because this rally could be just a rebound in a downtrend towards a test of the 200-day moving average. If social unrest starts in Russian due to skyrocketing food prices that will impact stocks worldwide. Therefore, it is important for the Ruble to stabilize otherwise we may have a replay of the 1998 Rubles crisis, as I wrote a month ago in this blog. In case this happens, stocks may drop by 10% or even 20%.
Short-term Technical and Quantitative Analysis
The Short in IYR was closed near breakeven based on the setup change yesterday before the open for a loss of $0.04/share and the short in SMH hit its profit target for a gain of $0.95/share. There are no pending setups and no open positions, as shown on the table below…