Fed Takes Starch Out Of Rally

A nice rally faded after the Fed announced that interest rates would be unchanged and remain at record low levels. The major indexes ended up barely changed.

Implied in the message was the hint that rates will move up, but not anytime soon. Furthermore, the Fed noted that that plans exist to end a host of programs designed to support the economy in the first half of 2010. Interpretation of the various statements pulled the indexes off their highs and pushed the dollar higher.

To me, it appears that the Fed will do anything to keep this fragile recovery going. Once stimulus plans come to an end, whenever that will be, that’s the moment of truth when rubber meets the road. In other words, does the economy have enough stamina on its own without trillions of dollars propping it up artificially?

Time will tell, but for right now the indexes are still stuck in a range and continue to bounce against overhead resistance. In the absence of a new impetus to create more upward momentum, we may be stuck in a trading range from which a breakout will eventually occur—we just won’t know yet if it will be to the upside or the downside.

About Ulli Niemann

Ulli Niemann is the publisher of "The ETF Bully" and is a Registered Investment Advisor. Learn more
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