FED LEAVES RATES UNCHANGED -- REVERTS BACK TO NEUTRAL MESSAGE -- MARKET REBOUNDS

MARKET LIKES FED'S BALANCED STATEMENT... No one was surprised that the Fed didn't make any rate changes today. What it did do was return to its statement of a couple of months ago that deflation was still a risk, that interest rates would stay low for a long time, and that upside and downside economic risks were equally balanced. The markets seemed to like the message -- probably because it removed the threat of higher rates owing to prospects for strong economic growth and incipient inflation. The dollar bounced a bit, which also contributed to a little profit-taking in gold and basic material stocks. Bonds were little changed. Stocks, however, managed a rebound. Although volume was light, it was higher than yesterday. Breadth figures were impressive with advancers beating decliners by a two to one margin. Several stock indexes closed back above their 50-day moving averages. Small-cap stocks and technology were the biggest gainers. Although the market is still locked in a trading range, today's action suggests that short-erm sentiment is improving. Rate-senstive brokerage stocks were also among the biggest winners. That's usually a good sign.

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MARKET INDEXES CLOSE OVER 50-DAY LINE... Several of the major market indexes closed back over their 50-day moving averages today. The list includes the NYSE Composite Index (shown below), the S&P 500 Index, and the Nasdaq Composite. The daily MACD lines (which have been negative for the past eight weeks) are close to turning positive for the NYSE. The next hurdle for the NYSE is the peak hit in late August. A close above that barrier would improve its short-term trend. Among the group indexes, the Semiconductor (SOX) also close back above its 50-day line. The Morgan Stanley Cyclical Index hit a new closing high for the year.

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VIX FALLS BACK TO 20... Last week, I expressed concern about the upturn in the VIX Index from dangerously low territory near 20. An upturn from that level usually spells trouble for the market. As the chart shows, however, the VIX has fallen back down toward the 20 level. While it's still low by historical standards, its recent fall reduces some short-term concerns.

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TJX SCORES BULLISH BREAKOUT... TJX had a great day in the retail group. The daily chart shows the stock breaking out to a nine-month high on rising volume. The weekly chart ahows TJX also having broken a fifteen-month down trendline

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DEERE TRACTORS HIGHER... The big tractor maker broke out to a new 52-week high today on massive volume. The weekly chart shows Deere trading at the highest level in five years.

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