Surprise, surprise. Ben Bernanke had one last trick up his sleeve as he exits state right and that was to do the opposite of what happened in September. Back at that Federal Reserve meeting all the smoke signals had indicated the Fed would reduce its quantitative easing program to a small degree - but they did not. Today, the majority expected no action and instead we got the small reduction. After a knee jerk reaction downward the market made a stupendous move the following 2 hours, posting a rare bullish engulfing pattern on the S&P 500; not just of the previous day but of the previous few weeks. The S&P 500 gained 1.66 and the NASDAQ 1.15%; all of that plus more in the final 2 hours as the indexes were negative pre Fed. That said today's action by the Fed was perceived by many to be dovish because while they reduced QE by $10B per month they put in more dovish language in terms of interest rates:
The central bank said it would reduce its monthly asset purchases by $10 billion to $75 billion, while it also indicated that its key interest rate would stay at rock bottom even longer than previously promised. It said it "likely will be appropriate" to keep overnight rates near zero "well past the time" that the U.S. jobless rate falls below 6.5 percent. Regardless of the Fed's decision, "the overriding theme is that rates are going to stay low for several more years," said Dan Greenhaus, chief global strategist at BTIG LLC,.
Both indexes staged an engulfing pattern where the previous day's low was breached along with the previous day's highs, but it was even more extreme than that as the NASDAQ engulfed a week and S&P 500 two weeks....all in 2 hours.
Breadth had been lacking the past month but as you can see today's session was the best in that regard since mid October.
Finally the NYSE McClellan Oscillator is back in the green; hopefully for bulls it stays that way for a while.
As for volatility we saw the exact opposite situation; after hitting a 2 month high we have a bearish engulfing candle today.
Financials were a key tell they reversed hard mid afternoon to the upside - keeping this as a leadership group would be a positive. This was another massive bullish engulfing session which engulfed 2 prior weeks.
Housing was also another strong sector as shares of Lennar Corp jumped after the No. 3 U.S. homebuilder reported a 32 percent jump in fourth-quarter profit. Data on Wednesday showed that U.S. housing starts surged to the highest in nearly six years in November, a sign of strength in the housing market.