Stock index rally fades in final minutes of the session

Stock indexes held firm for most of the session prior to the fed cut. It was widely expected that the cut would be a half point, and the indexes seemed pleased that the fed met expectations. It looked like the indexes were going to tack on another two or three hundred points to the spectacular gain from Tuesday. However, in the final ten minutes or so of the day session the indexes reversed, with the Dow suddenly down over a hundred points going into the close. It was able to trim that loss to a bit less than a hundred points on the settlement. The chart to the right shows the Nasdaq 100 etf. There is a very clear bullish divergence between price and the short term momentum indicator, as illustrated by the diverging yellow lines. The uptick in the indicator only occurred after the big rally on the previous bar. The divergence was setting up on the downmove, and the indicator was in oversold territory, but waiting for an upturn on a closing basis would not have been timely enough to enter prior to the rally. I track dozens of momentum indicators and none of them turned up prior to the rally on Tuesday, at least not without curve fitting parameters. It is interesting how the high of the price bar today stopped right at the longer term moving average (the darker blue line). The S&P looks about the same. The previous touch of that moving average over two weeks ago was able to turn back prices and another impulse down followed. However, that impulse was weaker than the previous impulse, and the moving averages look like they are losing momentum to the downside. Along with the momentum divergence, it looks like prices could try again to take out that moving average. If the line can cross and subsequent retests hold above the moving averages, a meaningful correction upward would be likely. A 50% correction would be a meaningful move, even if the longer term picture is still a bear market. I’m leaning in that direction, but I’ll leave the roller coaster in the box. If a rally should occur it could be a bumpy ride.
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