The Fundamentals:

- The FOMC minutes were helpful in explaining that the deletion of "considerable period" with regard to its accommodative policy "would serve to enhance the Committee's flexibility to adjust monetary policy at a later date when that was deemed appropriate on the basis of evolving economic circumstances". (Briefing.com)
Sounds like a good old fashioned CYB (Cover your butt) if you ask me! (B

- Note that the S&P 500 is now outperforming the Dow on a relative basis due to buying interest in the defensive drug, healthcare, consumer, and insurance sectors. (Briefing.com)

The Reports:

- Adv GDP 4th Qtr 7:30

-Univ of Michigan Jan Final Sent 8:45

-Chicago Purchasing Mgrs 9:00

The Technicals:

-The short-term and intermediate trends reamiin lower. A close above 1138.00 moves the short-term trend up, with a close above 1142.00 moving the intermediate trend back to the upside. A close below 1132.00 keeps both trends moving lower.

- Yesterday was a continuation to the downside, but with the market closing above the 20-day moving avg. after trading below this area all day, One should question if this was a short-term dip.

The Long and the Short of it:
I am looking at yesterday's trade in a somewhat positive sense. Eventhough the market traded lower most of the session, and tested the S2 level, the market bolstered enough strength to close above the 20-day moving avg. With important economic reports set-to hit the market today it will be interesting to see if they will be able to fuel a rally and overcome the past two days "knee-jerk" reaction to the FOMC's change in terminology. I am inclined to buy a quick pull back to the PP this morning, but will hold off form buying until the market tests teh S1 level (1123.00), and I will hold off from selling until the R3 level is tested today. Call me crazy, but I think we are in for a surprise rally today. I have been wrong in the past, but when I am wrong, I try to control the damage as much as possible.

Good Trading!

Michael A. Cavanaugh
My Futures Online
mike@fcillc.com
1-888-942-7829

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