The S&P 500 - I will use its depository receipts or SPY from now on - broke out decisively yesterday to the upside. Around midday it was forming a high, tight flag, indicative of a potential explosion to the upside. A stop could have been placed just above 140 or so. It is unclear if it would have been filled near that range however as the market exploded up immediately after the fed announced its interest rate cuts.
Only a few weeks ago I was bearish and net short the market. Then I was flat; I spent the last 45" of trading (an excellent time to enter the market, by the way - the first 30" are the worst) getting long.
I bought SPY at prices from 151 to 152, as well as XLE, XLU, and the Dogs of the Dow, namely AT&T, Verizon, GM, GE, Citigroup (a phenomenal value right now, me thinks), JP Morgan. A full list is available at www.dogsofthedow.com. I also picked up some Target.
Any 3% surge on good volume across major trendlines and the 20 day high must be taken seriously. Historically, most followed through. The dangers remain, of course, but the willingness of the Fed to perpetuate the bubble if need be means investors should adhere to the old adage of not fighting the Fed. They seem serious about doing whatever it takes to restore liquidity and confidence.
I would expect some choppiness but an equal likelihood is a market that never comes down to "reasonable" levels, so starting to move in aggressively any cash on the side is critical to long-term performance.
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