SPX Weekly Chart Shows the Diminishing Returns of QE1, QE2, Operation Twist with LTRO1 and 2 and Projects QE3

QE3, or more correctly, QE Infinity is the last box on the right.  The boxes have a Fibonacci vibe and that is no wonder since the monthly duration of the central banker pumps are about 13 months for QE1, then 8 months for QE2, then another Fib sequence number, about five months for Operation Twist and LTRO 1 and 2, so perhaps, the latest circus will only be about three months or so, if so, then we are already near the end of QE3 effects, as surprising as that sounds.  With Chairman Bernanke supporting the stock market and stoking inflation, it is hard to imagine that the current rally would not have more legs, but, using the past to project the future only results in about 255 points for QE3 and about 200 have already rattled off.

But simply projecting QE3 by curve fitting the upward trend and the diminishing returns yields an interesting result.  The pumps occur one after another with a 670 point increase for QE1, then about 330 points for QE2, then about 270 points for Operation Twist with LTRO 1 and 2, which then projects about 255 points for QE3. Interestingly, the 1270 bottom plus 255 yields 1525 as a target for QE3. Keystone's 80/20 rule says if a close above 1480 occurs, a move to the 1520's is likely. The red lines show negative divergence in place but the shorter term lines, due to all the recent money pumping talk, will want to see a stutter step move or moves occur as the SPX tops and rolls over.  So perhaps a path of selling will now occur down to the mid to high 1300's, or low 1400's, then back up to tag the 1525, then roll over. These markets can only be taken one day at a time and the above projection is simply based on fitting the upward curve. This information is for educational and entertainment purposes only.  Do not invest based on anything you read or view here.  Consult your financial advisor before making any investment decision.