3 steps down and your out, is the potential I see on this chart. The first step being the first test of 1430 in early August, the 2nd step being the brief test of 1375 later in the month. Yesterday we retested 1430 and today rebounded back to where we were at Monday's close leaving the market far enough away from a 3rd step re-test, for now.But there's a lot more to it than technical analysis.
The impact of expected Fed action in September remains a wild card. The discount rate cut took the market off the lows nearly 2 weeks ago, but the inertia remains from a variety of systemic ailments. Gentle Ben will be speaking Friday in Jackson Hole, Wyoming. Will he engage in further jawboning ala the love note to Chuck Schumer to try to instill further confidence? Ultimately, the market is demanding real action by way of a fed funds rate cut for not only a psychological boost, but to remove inertia. Words won't be enough and time is getting tighter for the Fed ahead of its 9/18 policy meeting. The pyscho boost from a fed funds cut would give temporary further relief to the stock markets, etc, but will the Fed by giving back 1/4, or 1/2 point take real pressure off areas like commercial paper, or help a few hundred billion in LBOs receive their funding in the next 60 days, or save borrowers from defaulting on the coming wave of ARM resets?
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