Even though yesterday’s closing prices did not reflect the intra-day activity, it was a wild day nevertheless. The chart above (courtesy of freestockcharts.com) represents Tuesday’s 5-minute interval moves of SPY.
It was waiting time until the Fed announcement, which occurred as indicated via the red arrow. Prior to that, the markets were down, then shot straight up and whip-sawed the remainder of the session but cut the losses for the day in half.
The Fed threw the market a bone by announcing that it was willing to expand its holdings of government debt thereby insuring that there are adequate supplies of cash in the economy.
The bone did not have much meat on it, which explains the continued uncertainty after the announcement displayed by the erratic market behavior in the chart.
Going this route is an admission, at least to my way of thinking, that economic conditions could worsen and that the Fed is willing to deploy any tool it has available. I am not an economist but, historically, none of the past actions have resulted in any long-term benefit and have proven to be of questionable duration and effect.
Nevertheless, if the markets decide to interpret this as a positive event by continuing to rally, I will not question this upward tendency and stay aboard until the trend comes to an end and our trailing sell stops issue the signal to step aside.
These are very difficult market conditions because not only does the Fed seem confused as to which next step to take, it also is slipping into unchartered territory with its decisions.