The Fed gave stocks a boost on Wednesday with another rate cut. The cut was widely anticipated and they changed some of the language in the statement that accompanied the rate decision, but all in all stocks seemed to rise after the announcement. Third quarter GDP results were a little better than expected and that helped lift stocks as well.
Three of the four indices gained ground on the day with the Dow leading the way with a gain of 0.43%. The Nasdaq and S&P both gained 0.33% on the day while the Russell closed with a loss of 0.27%.
[hana-code-insert name=’adsense-article’ /]The Dow wavered back and forth between gains and losses until the Fed announcement, but the other three were in negative territory through the rate cut.Eight of the 10 main sectors moved higher on Wednesday and they were led by the utilities sector with a gain of 0.88%.
The consumer discretionary sector tacked on 0.62% and the tech sector moved up 0.61% as the second and third best performers.
The energy sector fell 2.07% and that was by far the worst performer on the day.
The financial sector dropped 0.07% and was the only other sector that lost ground.
My scans continued to produce negative results and they actually turned a little more negative last night. There were 67 names on the bearish list and 10 on the bullish list.
The barometer dropped from -30.6 to -40.4 once these results were added in to the equation.
There was one stock on the bullish list that I was intrigued by last night, but there were a number of setups on the bearish side that looked like better choices. The one that stood out the most for the chart and the risk/reward relationship was the SPDR S&P Metals and Mining ETF (NYSE: XME). The fund got a bearish signal generated from Tickeron yesterday and past predictions have been successful 90% of the time.
We see on the chart that the fund has been trending lower since February. The highs from the last six months now connect to form a downward sloped trend line and the stock just hit the trend line earlier this week. The fund reached overbought territory recently and the stochastic readings made a bearish crossover yesterday.
Buy to open the December 27-strike puts on XME at $1.40 or better. These options expire on December 20. In order for these options to double the fund will need to drop to $24.20. The fund fell below this level in August and May, so it won’t need to break to a new low. I suggest a target gain of 100% with a stop at $27.70.
— Rick Pendergraft
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