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"The Fed lowered interest rates more than expected and in a way that has Wall Street talking; in fact, the stock market is setting up a potentially bullish technical formation," technician Mark Leibovit, editor of Volume Reversal Survey -- often ranked among the top performing market timing services.
He reports, "The market expected a 50 basis point cut to 0.5% with a chance of a 75 bp cut to 0.25%. Some even called for a rate of 0%. The Fed made a lot of people happy, though a bit confused, by lowered the Fed Funds rate target to a range of 0% to 0.25%.
"This is the first time the Fed has lowered rates to a range instead of a an actual number. It also bring the Fed Funds rate to its lowest target rate ever. The Fed also pledged to use "all available tools" to combat a severe financial crisis and prolonged recession. The stock market likes the lower interest rate and the Dow is up 360 points, the S&P is up 44 and the NASDAQ is up 81.
"As I write, all nine market sectors are trading higher, led by Financials which are up 9.8%. Goldman Sachs (NYSE: GS) is up 17.2% after reporting its first quarterly loss as a public company.
"Morgan Stanley (NYSE: MS), which announces results tomorrow, is up 25.2%. Bank of America (NYSE: BAC) fell after analysts at Friedman, Billings, Ramsey & Co. reiterated their underperform rating on the stock with a $9 price target, but is now up 7.0% as the whole sector moves up after the rate cut.
"The market has held up quite well over the last month, though the economic data has deteriorated markedly. But we must remember that the market leads the economy by six to nine months. The bad economic news we are seeing now is already reflected in the huge decline in stocks we saw over the previous few months.
"The stock market is setting up a potentially bullish technical formation. Though the formation isn't perfect (they never are), it looks like we might be forming a reverse head and shoulders.
"Additionally, the market is testing its 50 day moving average. And with today's rally, we are in striking distance of the December 8 high. If the market can push its way through these levels, we could see a further 10% rally into the early November high.
"Indeed, with the 50-day moving averaging now being crossed, it appears that we have a shot at 1000+ on the S&P 500 (vs. today's close of 913)."
Steven Halpern's TheStockAdvisors.com offers a daily look at the latest market commentary and favorite stock picks and investment ideas from the nation's leading financial newsletter advisors.
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