Fed Day
S&P – Stock index futures continued their recent rally this morning ahead of the Fed announcement. The mortgage and banking sectors are still riding the wave of enthusiasm sparked by President Bush's mortgage bailout plan and capital infusions from outside investors. Many traders are looking for a quarter point rate cut and a positive statement from the FOMC, but not too positive, as it could close the door on further cuts. Also, any mention of inflation in the statement could have a negative impact on the market. Technically, the December e-mini S&P is coming in very overbought due to the recent rally. Momentum studies continue to outpace the RSI, which may help offset the negative bias. The market managed to hold yesterday's rally above the 50-day moving average, which sets a positive tone for the market longer-term. Support comes in at 1490 and 1465, while resistance can be found at 1525 and 1550.
Crude Oil – The Oil market has rebounded in early trading after starting off the week on a sour note. Petroleum traders have struggled to justify current prices levels, as inventories remain strong enough to meet the winter demand and the health of the U.S. economy remains a huge question mark. A quarter point rate cut and a positive statement from the Fed today may aid prices in the near term, but many traders remain skeptical on the longer-term price outlook for petroleum prices. The January Crude chart remains bearish, as the market continues to trade sideways after the price collapse, signaling the possibility of further downside. Momentum has rebounded slightly, but remains negative and is being outpaced by the RSI, which may be seen as bearish near-term. Support comes in at 86.85 and 84.05, while resistance can be found at 90.70 and 93.00.
Gold – Gold is trading lower this morning on a stronger U.S. Dollar and profit-taking, as precious metal prices have detached themselves from energy prices over the past couple of weeks. Gold has become a safe haven for traders who are pessimistic about the economy and have lost faith in the energy sector. The Fed rate cut has been priced in by currency traders, so it may not have a large impact on the Dollar. A bleak policy statement could trigger a sell-off in the greenback and support Gold prices. Since almost confirming a double top reversal on the daily chart, February Gold prices have rebounded over $30. Momentum has shifted gears and is now approaching positive territory after spending the past two weeks on the negative side. Support can now be found at 795 and 785, while resistance comes in at 825 and 835.
Rob Kurzatkowski, Commodity Analyst
