But in the afternoon, ECB governing council member Axel Weber said rising inflation in the euro zone may require additional policy action, according to Dow Jones Newswires. The comments appeared to raise concerns on Wall Street that European growth could slow and that in the United States, inflation could prevent the Federal Reserve from making another rate cut.
Many investors have been betting on another rate reduction from U.S. policy makers, who lowered the target federal funds rate by half a percentage point on Sept. 18 in response to a tightening in the credit markets.
Wall Street's mood was also dampened when JPMorgan Chase & Co. lowered its revenue expectations for Baidu.com Inc., said Kelmoore Strategy Funds portfolio manager Matt Kelmon. That hurt technology companies, which had been rising strongly in recent days.
The ugly inflation word reared its ugly head and the market was reminded that agricultural and energy prices are still at very uncomfortable levels. In addition, technology has been the great saving hope of the markets, so the downgrade would definitely be considered a bearish indicator.
Respectively, here is a chart of the SPYs, QQQQs and IWNs.
Both the SPYs and the QQQQs broke a strong uptrend today. There are two possible trend lines for the IWMs. I included both, although I think the highest one is the most appropriate beacause it makes more connections with actual prices.
Here are, respectively, the two day charts of the SPYs, QQQQs and IWMs. Notice the extremely heavy selling volume on the downward moves. Also note the extremely large candles indicating the severity of the selling action this afternoon.
However, despite the heavy selling action, the upward trends on the daily charts of the SPYs, QQQQs and IWMs is still intact.
All three daily charts are still strong. My guess is traders have watched the market go up since the Fed cut rates. They were looking for a reason to sell and today's news gave them that reason.
Over the next week, pay particular attention to the SPYs. I use this average as my overall market benchmark because it includes 500 companies and a good breadth of market sectors. The chart could still be forming a double top.
