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Equity futures higher ahead of the Fed

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S&P 500 futures are indicating higher this morning as they advance by 4 points. NASDAQ futures are up 11 points and Dow futures are higher by 15. We're also seeing some selling in the shorter end of bonds with the 5-year Note YIELD rising to 4.544%. S&P fair value for today is $11.58 with buy programs set at $13.32 and selling set at $9.54.

It's not what you think stocks should do, it's what the MARKET thinks stocks should do.

Later today we should have a decision from the Fed and Mr. Greenspan regarding interest rates. Traders should remember to play the trend. There are those market participants that have felt that interest rate cuts should benefit stocks, but since the beginning of the year when the Fed began getting aggressive with interest rate cuts, the cuts have yet to boost stocks. At some point the interest rate cuts will have a positive effect, it may be today, but be willing to observe the MARKET reaction and swim with the tide.

NASDAQ-100 Index Tracking Stock (QQQ) - last six months

Currently I'd say the QQQs have upside to the $45 level and downside to $41. A good rally by the MARKET and a favorable reaction to interest rate cuts could see this index read the $50 near term. On Friday, we recommended that traders should lock in profits from their short/put position in this index and so far that looks to have been the right call. We'll be monitoring things closely today here, but current field position of this security makes it tough to buy for the short-term trader unless they're willing to risk $3 to make $3. Any bullish positions established ahead of the Fed meeting should be followed with a tight stop just under yesterday's low of $40.75.

Jeff Bailey
Senior Market Technician

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