Wednesday 29 October 2014

QE3 set to be officially terminated

Barring some bizarre change of plan, the US Federal Reserve look set to terminate QE3 tomorrow. The market has not 'gone it alone' in a full two years. The mere psychological loss of Fed support, will be a problem for Mr Market, at least to some degree.


sp'monthly8 - QE phases


Summary

So... another day for the equity bulls, with a daily close of sp'1985. Frankly, even I'm surprised. I thought my upside target for the mid 1900s - stated two weeks ago, was bold, but here we are... just 1.7% from breaking the 'Alibaba top' of 2019.


The weekly charts offer a mixed picture.

sp'weekly


I suppose it could be argued we are back testing the old broken support/trend, but still.. this is one mighty strong bounce.. if it could even be called that anymore.


Not waving the white flag... quite yet

Despite a move above my own 'last line' of the sp'1970s... there is still a moderate chance we'll see a major wave lower in November.

However, with each daily close >1970... it becomes less probable. The fact the Transports broke a new historic high this morning, makes a test of the 1820 low that bit more unlikely.
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Looking ahead

Wednesday will of course be all about the FOMC. The announcement is due at 2pm. There will NOT be a Yellen press conference. Market is expecting the termination of QE3, along with a press release stating 'rates will remain low'.

*Next QE is.... well, at least not until spring 2015
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A busy Wednesday is ahead

Today sure felt like bearish capitulation, as those who are already short were short-stopped in the 1970s. But what about Fed day?

I'll strongly consider an index-short tomorrow, after the 2pm announcement, but it will depend on price action. Personally, I want to see a minor initial spike on the upside, something on the order of 3-6pts, whether that is to sp'1980, 85, or 90s. A retrace of some kind... perhaps to the 1920/00 zone seems viable. Hopes of sub 1900... are pretty faded right now.

Finally, I want to say thanks to those that do say hello during the trading day... its always good to hear from some of you, bearish or otherwise ;)

One of these days the market will blow up.... when it happens.. I'll be there...



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Goodnight from London