Just a few words to describe the action right after the Fed announcement. As we thought, the Fed decided not to change much even in their statement. The market immediately fell out of bed and the Dow dropped about 170 points in 20 minutes and then found a bottom. From there, the Dow rallied 270 points to the high of the day just over 13,600. Going into the close, the Dow couldn't hold onto that high, which at the time was up 140 points on the day, and sold off into the close, ending up about 35 points. What a wild ride and not really unexpected after the Fed's news.
After the close, the market got a little shot in the arm from CSCO. We haven't had an opportunity to comment on CSCO for a long time. Tonight's earnings news was surprisingly strong and may be enough to drive the market higher in the morning, since the over night futures are up since the news. As for CSCO, it was up nearly 6%.
So, from our perspective, the market has actually gone to the highs that we have been talking about for a few days. That doesn't mean to say the rally is over. There may be another little push to our 13,675 level but, if so, this would probably be a good spot for selling.
We think the market has topped in the mid-July period with the Dow peaking its head above the 14K level for one close. If that is the case, this push should fail and we should then see some selling pressure. The question now is, when? Let's talk about that in the Real Wednesday Update tomorrow.