China lowers rates but US stocks mixed

China decided to drop interest rates today which caused much confusion in the markets. While Europe was generally quite pleased with the news, the US stock markets didn’t and the major indices in the US finished the day rather mixed. The Dow actually closed higher by 0.37% to 12460 and is nearing the critical 12500 which if broken upwards, could signal a large scale uptrend for the index. However, the S&P finished nearly broken even at -0.01% to 1314 on the day. In addition, the Nasdaq actually closed lower at 2831 which is a drop of 0.48% on the day. The USD has had little to say for itself in the last 24 hours, but gold prices, which we discussed earlier this week, was pummeled and is now down again below the 1600 level at 1589.

The day would have probably finished much higher but the highly anticipated speech by Ben Bernanke (the head of the US Federal Reserve) did not hint at any quantitative easing, which is just a form of monetary stimulus or a means of pumping in more money into the economy in order to generate higher growth. Without this, the markets seemed to drag their feet and not gain any serious momentum. After watching the Chinese lower rates, the expectation was probably higher on the US to make a move as well. But with no hinting of such a move, markets were left to finish the day without much momentum. It is important to note that Bernanke was quoted as saying that "As always, the Federal Reserve remains prepared to take action as needed to protect the U.S. financial system and economy in the event that financial stresses escalate".  But that, in our minds, just means that there is no justification for any action at the moment which is likely the statement that took all the wind out of investors’ sails. Many in the industry believe that the weak employment data is reason enough to add more stimulus to the economy, but if nothing in the market currently warrants such a move, traders should expect little in the way of a central bank move of any kind in the coming future.

Some of the assets we have been watching neared critical trading signals but never actually reached. Google stock (GOOG) for example was heading higher yesterday only to end down for the day at 578. We don’t’ expect another attempt at the support or resistance for GOOG today, so let’s move on to another stock. Apple stock (AAPL) is a better choice for today as the stock price is nearing resistance at 577.5. Any break of this level should allow binary traders to take Up options with relatively low risk. We just maintain that traders should validate their trades using the RSI and MACD prior to opening the position. Make sure to also check volume prior to opening as this could be the key to success today.