US Oil Fund ($USO), SPDR 500 Trust ($SPY), ($VIX) Lead the Relief

Stocks are broadly higher as a relief rally continues for a second day after the Federal Reserve announced no changes to interest rates Wednesday. The S&P 500 added 23.36 points to 2163.12 in the wake of the announcement yesterday and is up another 11.23 points to 2174.35 points midday Thursday.

Treasury bonds are enjoying another post-FOMC pop as well and the yield on the benchmark ten-year is down to 1.61%, from an intraday high of 1.73% just one day ago.

Crude oil is up 97 cents to $46.31 and gold gained $13.5 to $1345.

On Wall Street, ten of ten market sectors are in the black, led by gains in Telecomm (IYZ), Industrials (XLI), and Technology (XLK).

CBOE Volatility Index (VIX) plummeted another 1 point to 12.30 and is now a far cry from the high of 16.09 seen intraday Monday. Meanwhile, trading in the options market is very active, with roughly 4.9 million calls and 3.9 million puts traded across the exchanges through the first two hours Thursday. Projected volume for the day is 20.5 million and 33% greater than the one-month daily average.

US Oil Fund (USO) Oct 11.5 calls are easily the most active options traded with 264,000 contracts changing hands. VIX Oct 22 calls, VIX Jan 23 calls, and SPDR 500 Trust (SPY) Sept Quarterly 215 puts are seeing notable flow as well.

The sharp drop in VIX and the two-day rally in the S&P 500 after the FOMC announcement seem to suggest that there were indeed some rate jitters weighing on the market ahead of the event. Yet, as the Fed left rates unchanged, as largely expected, and didn’t color outside the lines in the post-meeting statement, the relief rallied ensued.

Looking forward, the economic calendar is light throughout the remainder of the week, but picks up noticeably in the final week of September and the first week of October. And, as the third quarter draws to a close, focus will soon shift to the third quarter earnings reporting season. Zacks says analysts currently expect a 3% decline in year-over-year earnings on 1.6% higher revenues.

The energy sector is expected to be the biggest drag with results coming in 64% below earnings a year ago. Yet, as we can see from the chart below, the SPDR Energy ETF (XLE), which holds all of the energy-related names from the S&P 500, has been rallying in recent months and is up a respectable 18% year-to-date.

See Tradespoon’s Stock Forecast on SPDR TR-SBI INT-ENERGY (XLE)

Tradespoon’s Stock Forecast on SPDR TR-SBI INT-ENERGY (XLE)

One reason for the resilience in the energy sector despite expectations for dismal third quarter earnings is analyst expectations for an earnings rebound in the fourth quarter and into 2017. For that reason, it will be worth noting, not just the actual results, but if these companies can live up to rather lofty expectations.

On the technical front, XLE has recovered a 50-day moving average after a two-day rally. Resistance likely at $69 per share, $71, and $71.80. Support areas include the aforementioned 50-day moving average, $68.50 per share, and $66.90. Meanwhile, the S&P 500 is seeing some resistance at current levels of 2175, then possibly 2181 and 2186. Support likely at 2160, 2150, and along the 50-day moving average.