It’s been a nice bounce so far, but the big test is just beginning.  For the session, the market has held up during pullback dips, and is making a series of higher lows and higher highs.

The challenge is to keep this going and snapping the longer-term trend of lower lows and lower highs that’s haunted the market this month.

Seeking Fed Relief

Of course, this month’s market crisis, which was sparked by the Fed, coupled with comments a little while ago from the new number two fed vice chair, didn’t add the clarity the market was so desperately seeking.

Speaking at the Peterson Institute for International Economics, Federal Vice Chair Richard Clarida made these observations:

• “If the data comes in as I expect, I believe that some further gradual adjustment in the federal-funds rate will be appropriate”
• “Inflationary pressures seem low now, even with a tightening labor market and rising wages”
• “The economy likely has room to grow”
• “Rising savings rates suggest that consumers have more buying power, while tax cuts have provided an incentive for business investment”

As the number two guy at the Fed, making his first speech in that role, Mr. Clarida was in an awkward position.  He more or less echoed Chairman Powell, but he sounds willing to make adjustments based on data instead of theory and old formulas. 

He could have been clearer, hence the pocket of weakness that was created after he spoke.  The markets have picked back since.

The big test is set…if the Dow closes above 24,994, that would be huge.