Before the opening today, the president of the Chicago Fed said that U.S. interest rates may stay near zero until “late 2010, perhaps later.” This revelation tanked the dollar, raised Dow futures up 100 points and on the open sent stocks and commodities, particularly gold, sharply higher.  The Dow moved as high as 175, after good housing news. New home sales were up 10% vs. September.

The Fed comment is a classic example of “discrete” news. It moved the market, but has no lasting value. From its peak, the Dow fell .5% as of 1:05PM EST. We suspect the market will continue moving sideways and lower as it waits for some heavier news items tomorrow. 

Unless the tone becomes positive, we expect downward drift and volatility spikes. The current head-and-shoulders formations are likely to fall somewhat before a new rally begins. Pre-Thanksgiving volume may be light. The most stimulating news will arrive on Cyber Monday, November 30, when internet holiday sales and Black Friday numbers are reported.

GDP, store sales, and Case-Schiller home prices,report before the open tomorrow. Consmer confidence arrives at 10:00 AM EST. 

Go to www.etf-discipline.com for information on our newsletter and an explanation of our methodology.

Regards,

Paul Accampo