The focus in today's trading will be on the FOMC decision that will be released later this afternoon (New York time). The consensus forecast is for a further 25 basis points off the fed funds rate but it is the language about the possibility of future easings that will be scrutinized by traders. My suspicion is that the markets still expect further easing and that any suggestion by the Fed that the present easing may be the last would cause more discomfort than has been presently discounted. However I would not expect the Fed to stand tall in the face of a severely weakening economy and, to that extent, I believe that most traders have called it right that we can always count on cooperation from Doctor Bernanke.

Of the major US equity indices, it is the Nasdaq 100 index (^NDX) which has stuck its neck out the most in anticipation of increasing capital allocations in coming weeks to equities, and in particular, the technology sector. The performance of this index in the wake of today's interest rate decision and Friday's employment data will provide a very useful gauge of how strong are the underpinnings for further advances in equities. Market theory (or is it folklore) claims that traders look more than six months ahead and beyond the nadir of this downturn, and as long as major asset managers are not jolted into the realization that the recession could be a lot deeper than they currently expect, then as we move beyond this Friday's data the 2000 level on this index seems a likely target during May.



The Bovespa Index in Brazil (^BVSPA) has so far failed to break above the resistance at the 66000 level. Yesterday's drop of 2.8% sets up a test of the 50-day EMA and also the potential for a violation of the rising wedge trendline. If this uptrend line through the lows since mid-January was to be decisively broken this would raise real concerns about the sustainability of the recent renewed strength in the emerging markets.



Crude oil dropped substantially yesterday on weakening US demand and the growing view that the euro may have registered a significant top just above $1.60 is provoking some re-thinking across the board in the commodities. As previously discussed the Jim Rogers Commodity Index (^RCT), which covers the widest range of commodities, continued its decline yesterday and if, as the pattern is suggesting, the hot money in the sector sees more evidence that a lower double top may be in place, one could expect some unruly liquidations as funds rush for the exits.



XME, which is the exchange traded sector fund for the S&P Mining and Metals index, is revealing increased volatility at the top of its recent range and there is evidence that momentum has been waning since the mid-March levels.

Especially noteworthy is the striking doji star formation from Monday that I have highlighted which occured on a very substantial increase in volume. I would expect to see more volatility in this sector and be looking for further evidence of what I suspect could turn out to be an intermediate topping pattern.



Alcoa (AA) slipped below key moving average support yesterday. The overall picture suggests that a correction is underway and this would fit into the general perspective that is pointing to a slowdown in the appetite by hedge funds to be as long as they have been in the industrial commodities.



Mobile TeleSystems (MBT) is approaching firm resistance within the context of a developing bear flag.



My short trade in gold, discussed here ten days ago, has proven to be very profitable. It is becoming increasingly likely that there is no obvious support until the exchange traded fund, GLD, reaches towards the $82.50 level corresponding approximately to an $820/830 spot price.



Kinross Gold (KGC) continues down without finding any buyers to arrest the free fall. The $16 level from mid December seems to be an obvious target and that still lies more than ten percent below yesterday's close.



Clive Corcoran is the publisher of TradeWithForm.com, which provides daily analysis and commentary on the US stock market. He specializes in market neutral investing and and is currently working on a book about the benefits of trading with long/short strategies, which is scheduled for publication later this year.

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