S&P Rallies on Government Bailout
Today's big story was the government's plan to send relief to subprime mortgage holders by freezing adjustable mortgage rates for qualified borrowers over the course of the next five years. This announcement came at around 2:00 PM Eastern and the markets promptly reacted with a 10-point gain over the course of the next hour, as bulls appreciated the thought of fewer foreclosures.
On the chart, the e-mini S&P 500 (ESZ7) is clearly above both the 15- and 25-day moving averages today after clinging to the 25-day average for the last few days and trading below the 15-day average for almost a month. The slow stochastic is presently indicating no reversal to the downside. The last two market lows had a slow stochastic at around the 20 level (August and late November).
Today’s market upswing was most likely driven by news in a way that a lot of reversals are, but it's probably too early to say if this is a true reversal. Tomorrow should help clarify things, as the unemployment rate is set to be released at 8:30 AM Eastern.
Mike Tosaw, Director of Education
