The Fed Chair Ignites a Rally

Stocks were in need of a catalyst after trading mostly unchanged for two weeks and yesterday Fed Chair Jerome Powell delivered.

Every sector closed green...

Most of what Jerome Powell said was not new and the market had already anticipated and discounted it over the last few weeks.

What really got the market going is what he said about the Fed's December meeting. The Fed could "reduce the pace of rate increases as early as the December meeting..."

Bulls have been looking for a "pivot" and bears have been looking for Powell to crush the economy by continuing to increase rates aggressively. As it turns out, somewhere in the middle was good enough to get short sellers to cover and the underinvested to start buying.

We have been watching the put/call ratio closely over the last week which turned out to be a great contrarian indicator to keep a bullish bias. 

We haven't seen a put/call ratio print this high since the spring of 2020.

As far as the NASDAQ and S&P 500 are concerned, there are still considerable technical headwinds above that could create some problems moving forward, like the 200 day moving average and trendline resistance.

I've been expecting a broad market rally that would take price back to the levels shown above, but the reality is, many stocks bottomed months ago.

The public and media love to fixate on the S&P 500 and NASDAQ, but to me it's not so much a "stock market" but more of a "market of stocks." 

If you are willing to look past the headlines and ignore the perma-bears, you can usually find a bull market somewhere.

A good place to start is with sectors and industries that are trading above their 200 day moving average.

Below are a few of the more popular and well known areas of the market that have shown relative strength the last few months and are now trading firmly above their 200 day moving averages:

DIA - Dow Jones Industrial Average
IVE - S&P 500 Value
XLB - Materials
IBB - Biotechnology
XLF - Financials
XOP - Oil & Gas
XLV - Health Care
XLI - Industrial
BJK - Gaming
XLB - Materials
XLP - Consumer Staples
COW.TO - Global Agriculture
XEG.TO - TSX Energy
XCG.TO - Canadian Growth

Is the bottom in? Or is this just another bear market rally?

Let us know what you think.

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