Major market indexes went parabolic on Wednesday following the Fed policy announcement and Fed Chair Jerome Powell's press conference where he for the first time shifted from his usual not even thinking about thinking about lowering rates to outlining a precise sequence of interest rate cuts in 2023 and 2024. The week ended with a volatile year-end quadruple-witching options expiration on Friday.While the index has been up seven days in a row, Thursday and Friday both saw churning action on heavy volume. Thursday's volume was very high and even higher than Friday's quadruple-witching options expiration volume. As we head into the final week before the Christmas holiday we will see whether this high-volume churning action is meaningful as the indexes have gone near-term parabolic.
Precious metals launched higher following the Fed announcement. Gold and silver both posted moving average U&Rs as measured by the daily charts of the VanEck Merk Gold Trust (OUNZ) and the Aberdeen Silver Trust (SIVR). OUNZ posted an MAU&R along its 20-dema while SIVR did so along the 50-dma. Both metals held support above their 10-day and 20-day lines on Friday which would expect to serve as potential support if the move off the lows is to continue.
The dovish Fed remarks on Wednesday set the market on fire. Commodity-related names like Alcoa (AA), which recently failed after a pocket pivot breakout in late November that we reported on, sprang to life on Wednesday with a big-volume pocket pivot move coming up through the 10-dma, 20-dema, and 50-dma as well an undercut & rally (U&R) move through the prior early November low.
Arista Networks (ANET), which we reported on as a pocket pivot last week has continued to edge higher with the market. On Friday it posted a new all-time high on heavy OpEx volume and remains extended for now as the 10-dma and 20-dema seek to play catch-up.
Friday's year-end quadruple-witching options expiration sent volume higher for many stocks, resulting in some interesting action. For example, on Friday Amazon.com (AMZN) posted a big-volume breakout while Microsoft (MSFT) posted a big-volume pocket pivot and moving average undercut & rally (MAU&R) long entry at its 20-dema. Technically, both moves are actionable using appropriate selling guides at the 10-dma for AMZN and the 20-dema for MSFT. While exaggerated volume as a result of OpEx can be suspect, often it can be taken at face value, so it will be interesting to see how these long entry triggers in AMZN and MSFT play out this coming trading week.
The Market Direction Model (MDM) remains on a BUY signal.