The Line Held, Barely

The US equity indexes bounced viciously today off of levels touched the day before. The Dow after being down around 300 points or so, rose by about 300 points for a 5% swing from bottom to top. Important technical levels held yesterday as well. The Dow held the 11,600 area which it hit the day before, the Nasdaq held the 2200 area also from the day before and the S&P held the 1270 area. Interesting about the S&P though is that it actually went through Tuesday's low but only by a few points.

The relative strength in the home builders and the brokers during the day stood out. Bear Stearns (BSC) at the market's worst was down less than 2 points which was exceptional and then led the markets higher late in the day. Goldman and Morgan were top performers for the day as well. The relative strength of the builders stood out. Toll Brothers (TOL) is another stock I follow and early in the day it barely dropped as other stocks cratered and then it rallied sharply jumping around 10% going into the bell, pulling everything else up with it. It is very notable that the home builders and the Investment Banks showed such relative strength when they have been notable for their weakness. One day's strength does not make a trend though.

There is no doubt in my mind that the equity markets were helped substantially by the Fed rate cut on Tuesday. There are many questions left unanswered though. Two of the largest are: Will the rate cut and the stimulus plan stave off recession? Have the equity markets bottomed or are they eventually headed lower any way?

* Stats from Yahoo Finance

** Disclosure: I have no positions in the names mentioned here. The firm I advise may or may not have positions in the names mentioned here.