The bulls partied and enjoyed a swig from the punch bowl after oil prices broke below $120/barrel and the Fed, as expected, left interest rates unchanged. Bargain hunters stepped in doing some buying while short-covering helped the bullish cause.
It’s not secret that the Fed is stuck between a rock and a hard place. Yesterday, they chose boosting the economy by not touching interest rates as opposed to raising rates to contain inflationary pressures from higher energy and food costs as well as support the ever sagging dollar.
While the rally seemed impressive, it did not change the underlying fact the trend is still stuck in bear market mode. Our Trend Tracking Indexes (TTIs) are now positioned as follows:
Domestic TTI: -2.51%
International TTI: -7.32%
It was definitely a feel good day for the bullish crowd and several newsletter readers emailed telling me that they had taken the up day to unload some mutual fund positions they neglected to sell when our last signal was generated on 6/23/08.
We need to see a lot more upside movement and a break above the long-term trend line before we can declare this to be a new bull market. Until then, this is nothing more than a bear market bounce.