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Market's early vote is bullish to Fed cut

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Early on, it looks like market participants are responding bullish toward stocks on word that the FOMC has cut interest rates 50 basis points to 2.00%.

One think I'm doing to make this observation is monitoring "both ends of the snake." Earlier today, the energy related stocks were the loser (tail of the snake), while the Internet stocks as characterized by the CBOE Internet Index (INX.X) was acting strong for the bulk of the session.

After the FOMC announcement, the OSX.X cut about 1% off of an earlier 3.5% loss. The Oil Service Index (OSX.X) was the weakest stock sector going into the FOMC news.

The early session strongest sector was the CBOE Internet Index (INX.X) and it actually gapped higher on its 5-minute chart immediately following the FOMC news. With the head and the tail of today's snake moving higher, I surmise a bullish reaction to the Fed rate announcement.

CBOE Internet Index - 5-minute interval chart

Yesterday, the CBOE Internet Index (INX.X) gapped higher as bullishness prevailed ahead of Cisco Systems (NASDAQ:CSCO) earnings. Today, the sector continued to show gains in a rather mixed market. In my mind, I classify this group as the "riskiest" of sectors to be bullish. The stocks lack fundamentals and trade at lofty price/earning ratios. However, this also gives us an excellent index to monitor as it relates to just how aggressive or bullish the market is getting or can get. My thinking over the years has been, "the stronger the INX.X, the stronger the NASDAQ and broader market" as participants get more aggressive on the buy side of things.

As it relates to the above chart, I'd want to see a sustained move above the $112.52 level or today's high as further indication of bullishness. Sometimes it takes more than 5- minutes to get a feel for market response to important market news like the FOMC data.

Hewlett family against Compaq merger

Shares of Dow component Hewlett Packard (NYSE:HWP) have jumped 14% on word from the Hewlett family that they will vote their shares against the proposed merger with Compaq Computer (NYSE:CPQ).

Hewlett Packard Chart -

Shares of Hewlett Packard (HWP) have jumped as high as $20.04 today after a family spokesperson of joint founder Hewlett said they would vote their shares against the proposed merger with Compaq Computer (CPQ). Early estimates are that the family still holds approximately 5% of the voting stock, but their position could carry weight with other shareholders.

Jeff Bailey
Senior Market Technician
Option Investor

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