The market reaches lower to find support
The Dow had a wild trading session after falling slowly throughout the day to eventually rebound back into positive territory. The Dow began the day trading at 7552 and closed at 8046. The spread between the highs and lows were tremendous in terms of points and percentages with a 622 point range from 7449-8071.
Sideways trading ruled much of the day but it wasn’t until the final hour at 3:00 did the market begin to rally. It seemed almost timed that buyers would convene in the markets all at one time and start a rapid buying spree. This tells me that the old recession lows are an amazingly strong support and resistance line as the bottom today was perfectly aligned with the previous recessions/bear markets.
Even with troubling news such as California’s huge unemployment rate of 8.2% the market was able to make its way out. Helping it might have been Obama’s decision of a new Treasury Secretary and the FDIC’s new rule to back up interbank loans. As of today the FDIC practically takes on the responsibility of the previous TARP program. Loans longer than 30 days will be able to qualify for government guarantees.
In any even the 7500 area has been tested and will prove to be a strong level of support going forward. The next range appears to be 7500-8000. If its like the last formation this sideways market will last for another two months, but I think some form of catalyst will move the market in and out quickly a number of times. Keep an eye on this 7500 level.
