Thursday 30 October 2014

The critical 1900 threshold

Whilst the Fed confirmed that QE3 is now concluded, the bigger issue is what about equities next month? The recent ramp from sp'1820 to 1991 - a gain of 8.6%, has turned many back to a broadly bullish outlook... but there remains underlying weakness.


sp'daily5c- the 3 warning levels.


Summary

I wanted to start the last post of today with something which I consider pretty pivotal. The sp'1900 threshold is unquestionably a key threshold.

In my view.. if we see any daily closes under sp'1900, it will open the trap door to a fast move to the sp'1650s - which remain a simple 38% fib retrace of the giant wave from Oct'2011.


1990s... then 1650s ?

The current 'rainbow' weekly candle remains green, and even if we close 1-2% lower by the Friday/monthly close, it will still be green. However, this is not unexpected, and it does not prevent the bigger bearish scenario.

sp'weekly7 - bearish outlook


I still think many are overlooking the importance of the initial break under sp'1900. That was a crucial support, and it was decisively broken. A great deal of technical damage has been done. The fact we've soared back over it, is not that concerning to me. Indeed... a ramp into the mid 1900s was expected.
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Looking ahead

We have the usual weekly jobs data, and Q3 GDP (first reading)... market is seeking 3.0%.. which seems a little overly optimistic.

Yellen is due to speak at 9am.. but it is not related to the Fed, and should have ZERO bearing on the market tomorrow.
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Still waiting

Today was interesting, but I didn't take any positions. With the new cycle high of 1991 in the morning, and weakness in the early afternoon, the smaller 5/15min cycles looked too low to launch an index short... so I held off.

Instead, I will look for a micro double top around 1990 early Thursday morning. If we get stuck there.. I'll start hitting buttons.. with a first exit target of 1925 or so.. within 2-5 trading days... along with VIX 20s.

Goodnight from London