After a morning sell-off Wednesday, the S&P and Nasdaq rebounded back into positive territory while the Dow slumped to a small loss. Accelerating afternoon gains were dovish FOMC minutes, which indicated QE3 may not be far off. Markets seemed to be expecting some sort of policy action at the most recent meetings of both the US Fed and ECB; none came, but stocks moved higher anyway. Perhaps now we know why.
In the minutes today, Fed governors indicated that justification for further bond purchases was growing as the economic and employment picture remained bleak, and the FOMC may choose to begin QE3 in the not-too-distant future. Words, as has been customary, remain one of the Fed’s strongest policy tools. Precious metals, always sensitive to Central Bank announcements, spiked on the inflationary news. Gold (GLD) and Silver (SLV) gapped up on Tuesday in anticipation of the Fed minutes, the first real catalyst for those commodities in weeks. Both GLD and SLV remain in macro descending triangle patterns, and now look more likely to break it to the upside.
Apple (AAPL), and tech in general, helped the market rebound by putting in a sharp reversal following yesterday’s sell-off. AAPL traded down through the low from the previous two days around $650, and reversed back above it, my mini Red Dog reversal signal to get back in long. I caught a nice trade in AAPL and closed out the majority of my position for a nice quick cash flow trade.
Amazon (AMZN) also briefly broke above pivot highs before fading in the last hour, and Baidu (BIDU) staged an impressive comeback after gapping lower and initially selling off hard this morning.
Disclosure: Scott Redler is long GOOG, AAPL, BIDU, LNKD, SLV. Short SPY