The Fed did surprise
us yesterday and given the failure of the market to sell the news, it was clear
we were not alone. The market closed above the upper resistance line we
highlighted as the point those looking to sell should do so. The line held at
12:32, 12:42, and again at 1:00, but by 1:20 it had made a fourth attempt and
never looked back.
The market loves
liquidity and the Fed’s goal here is to help the recovery, so at this point
there is no meaningful technical resistance until we get closer the 2000 and
2007 highs around 1553-1576. While that does not mean we get there in a straight
line, the 2010 QE2 announcement rallied right to the mid-term elections and had
a two week pullback followed by another 10 weeks of rally without more than a 2%
correction. While it probably does not trade the exact same way this time, that
is the roadmap that most eyes will be focused on. At this point pullbacks should
not fall below 1425.