The Fed decided yesterday to leave interest rates unchanged (no surprise), since the economy is so weak and fragile, that inflationary pressures are not a concern at this time.
Along with a hint that consumers may be starting to spend again was all the confirmation investors needed to pull the market out of a 2-day slump.
The S&P; 500 managed to close at its best level since January 28 and is now only down -3.25% year-to-date.
Amazingly, this rally resumed in the face of very negative Gross Domestic Product numbers. The GDP contracted for the first quarter at an annualized 6.1% rate, far worse than the expected 4.9% and marks the first time that GDP has contracted for 3 quarters in a row since 1975.
It did not matter, the markets raced higher with Dow at one point reaching the plus 250 point level before selling set in.
The only fly in the ointment was the fact that the S&P; 500 could not permanently pierce a major resistance level pegged at 875. While it traded above for a while, it could not hold on to those gains. Technicians, who follow support and resistance levels, seem to think that another 100 points on the S&P; to the upside is a distinct possibility once the 875 figure can be successfully penetrated.
Our domestic Trend Tracking Index (TTI) is now within 2.62% of breaking out to the upside, while the international index has to rise another +3.78% before a buy in that arena will be triggered. We continue to hold and add to our hedge positions subject to our sell stop discipline.