Equity traders gave a strong endorsement to the tone of the FOMC's announcement and are continuing to celebrate the plunge in commodity prices. Looking at levels on the S&P 500 (^SPX) the index came to rest just below the 38% retracement of the move from the mid-May high to the mid-July low. Depending on exactly how it is measured (i.e. whether closing or intraday levels are taken) this threshold lies around 1292.

The next target will be the 50% retracement level which is in the vicinity of the 1320 level.

When reviewing the much larger retracement from the October 2007 high to the previous mid-March 2008 low, this benchmark index, unlike the Nasdaq 100 and the Russell 2000, failed to make it back towards the 62% retracement of that previous move. Once again, moving beyond the 1320 and back towards 1350 which is now the 62% retracement level will be a key test for this current round of optimism.



In trading in Europe on Wednesday morning, the dollar has surged through the 108.40 level in a clear breakout pattern on the hourly chart.



The constructive technical behavior of the Russell 2000 (^RUT) should have been a constant reassurance for the bulls during the more troublesome market conditions in June and July. Yesterday, by attaining the 720 level, it completed one of the principal targets that I had mentioned several weeks ago.



Health care related stocks are generally behaving well and the sector fund XLV delivered the anticipated breakout yesterday.



Procter & Gamble (PG) looks set to challenge the late March closing high near to $70.



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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