View From The Hill: October 22, 2015

Commentary and Performance

Just the verbal promise of more QE coming out of Europe was enough to send stocks above some key resistance levels in today’s trading session. The S&P500 (SPY) closed at 2052.51 (+33.57 / +1.66%) and the Nasdaq-100 (QQQ) settled at 4503.22 (+89.70 / +2.03%). Lagging the market was the Russell-2000 (IWM), which failed to clear near-term resistance levels and ended the day at 1154.52 (+9.57 / +0.84%). Has anyone considered the market’s reaction should Mario Draghi fail to deliver an effective stimulus package that revives global growth?

The VIX is full capable of answering the above in a heart stopping beat but instead resumed its downtrend and declined to another short-term low at 14.45 (-2.25 / -13.47%).

Treasury rates declined a second consecutive day. The 10-Yr rate closed at 20.25 (-0.05 / -0.25%) and the 30-Yr dipped to 28.60 (-0.11 / -0.38%).

The Federal Reserve has deferred the interest rate hike that so many were anticipating and others were doubting and this is what sent the dollar into a bearish correction before it reconfirmed support at the 93-94 quadruple bottom levels. Credit for its explosive move today goes entirely to the ECB’s dovish announcement (hat tip to Mr. Draghi). The US Dollar Index closed at 96.45 (+1.39 / +1.46%).

In our two most widely followed commodities, Gold stepped down to at 1165.0 (-0.90 / -0.08%) and WTI Crude Oil found support at its 22-day moving average to settle at 45.49 (+0.23 / +0.51%).

The Dow Jones Real Estate Index achieved a new 3-month high and closed at 300.12 (+3.32 / +1.12%). Mixed results in housing data undermined the Dow Jones Home Construction Index which recouped most of its losses but still finished in negative territory at 591.60 (-8.16 / -1.36%).

Daily Chart Analysis

The benchmark index for stocks has broken out of its trading range and must now clear another level of resistance before its ultimate challenge at 2100. Today’s move was explosive. Look to 2020 as a new level of support from which stocks can build a more solid base. Otherwise, the rally is still overextended and vulnerable to sharp bearish retracement.