16 December 2008

The Fed Put an End to the Downward Trend

The Fed put an end to the downward trend, blowing a big raspberry at the dollar.


Here's an annotated chart of the S&P 500, showing all of the recent downward trends that have recently come to an end (click on the chart to make it large and legible):

It's generally a good idea to trade with the trend. Keeping that in mind, a Santa Claus rally could come to town.

However, the RSI(2) is getting overbought and the S&P failed to breach its recent high of 918. Are we really expecting St. Nick to usher in the January Effect this year?

Last year's Santa Claus and January Effects didn't fit the standard dictionary definition of "rally" (click on the chart to revisit 2008's craptastic start):

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