Rally Launch Has Strong Potential

U.S. stocks delivered a strong trend reversal on Wednesday, March 21, 2007, backed by strong volume and several important technical characteristics that suggest that more gains are likely.
For the last few days, although we have remained cautious we have been noting that the charts of the major indexes had been displaying double bottoms, and our stock lists had been building cautious long positions in stocks showing relative strength.
On Wednesday in our technical summary we wrote: "It is possible that we may be getting close to a nice move to the upside. And such a made for TV moment might come as early as 2:15 Eastern time today, if the Fed says something that the markets interprets as a good reason to rally."
Indeed, that's exactly what happened, as the Fed left interest rates unchanged and Wall Street interpreted the Fed's statement as possibly saying that the central bank may be finished with the potential for higher rates in the near future.
Of course no one knows what lurks in the heart of Mr. Bernanke and his crew of Fed governors. So, it's better to look at the market for clues as to what's next. And the clues are fairly encouraging.
First, the major indexes rose above key resistance levels, with the Nasdaq and the S & P 500 (see charts below in technical summary) rallying back above their 50 day moving averages. That means that the intermediate term trend has turned back to the up side.