Friday, 16 August 2013

Downside into the September FOMC

The main indexes finally picked a direction after trading within a 3% range for the past five weeks. With the market decisively breaking 1675, sp'1709 is now a confirmed top. The only issue is what happens after the current down wave concludes in September.

sp'weekly4b - long term hyper-bullish outlook



If there is one thing worse than losing money, its being on the sidelines, and not being involved.

I suppose I could have chased the open lower at sp'1670, but really, that goes against a core personal trading rule, never mind that the hourly MACD cycle was already low yesterday afternoon.

So..for yours truly, it was one of the most annoying days of the year so far. Tomorrow can only be worse, if we gap down another 1% or more. At which point, I'll probably turn off my screen until next week.

Downside into the next FOMC ?

The weekly charts are highly suggestive of downside into September, where we have the next FOMC announcement due on Sept'18.

If you consider that markets might unravel into that time, do you think there is a chance in hell that the Bernanke is going to start cutting QE? Hell no, in which case, the bounce from the FOMC is going to be fierce, probably 75-100pts.

That will get us right back into the mid 1600s, and then the ultimate issue will become apparent. Does the market put in a critical lower high...or does it just keep on rallying into spring 2014? Right now, that is utterly impossible to fathom, with late Sept/early October likely being a treacherous time for traders.

Looking ahead

There is a trio of minor econ-data tomorrow - housing starts, productivity/costs, and consumer sentiment. If those come in at least 'reasonable', then the market will have an excuse to rally.

*there is sig' QE of around $3bn tomorrow. Although yes, I can hear the bears bitching that since Thursday closed lower - despite the earlier QE, that negates the previous four year link between QE and the rising US/World equity markets. Idiots.

sp'60min'4 - H/S formation confirmed


So...what the hell do I do next? Going long is out of the question, not least now that the old support of 1675 has been busted. The only issue is trying to find a decent short entry level, but what if we just keep on falling?

Those daily charts sure aren't offering any sign of a turn yet, and as some out there are suggesting, a move down to the 1630/20s is viable within a few days.

Goodnight.. from a frustrated London