Price closed under the 20-week MA at 1419.39 so watch this critical S/R level today. The blue circles show how each time price dropped thru the 20-week, there was big trouble ahead. This near one-month QE4 Infinity and Beyond Rally in progress has honed in on the 20-week MA providing it even greater street cred. Note how the current rally is similar to the summer rally in that the markets are pricing in the Fed stimulus already, before the announcement occurs. The question is, how much is priced in? Some traders expect a 40 to 50 handle pop on tomorrow afternoon's FOMC announcement taking the SPX back up to the 1470's. This outcome cannot be ignored since the FOMC decision, and fiscal cliff drama, is an unknown, that can end really really well, or, really really badly.
We do know that the bottom at 1350-ish and move up to 1419 now is already a 70-handle rally, over 5%. Price bounced off the 50-week MA so that will be a key level as the weeks play out ahead. The top in September-October was easier to forecast than current conditions. The rising wedge and negative divergence (red lines for indicators sloping down) guaranteed the spank down. Markets are now in a sideways pattern at the mercy of politicians and central banksters. The S&P downgrade of U.S. debt occurred in early August 2011 which directly led to the waterfall crash. Understand that another downgrade would be a serious blow to the economy and markets. Also of interest is the Egan-Jones, a smaller rating agency but one who appears much more reliable, downgrades in July 2011, ahead of the game, and also two additional downgrades this year one in April, again, fortuitous timing, and another downgrade in September about a month or so ago.
Markets stumble sideways. The FOMC decision will be known at 12:30 PM EST tomorrow with Fed forecasts and a Press Conference all on tap as well. The Fiscal Cliff negotiations need to bear fruit by Thursday, say by week end, to allow time to simply price the bill and sort out all the administrative type requirements. Thus, seat belts will be required here forward. The RSI shows weakness from the price low in the spring to the price low one month ago which hints that price needs to come back down. Use the 20-week MA as a tool for this chart to directly note if the bulls or bears are winning. 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.
We're already starting to see propaganda like this, http://money.cnn.com/2012/12/11/news/economy/aig-treasury-sale/index.html?iid=Lead/, where we ready some fluffy story about how the Fed actually turned a profit on Tarp dollars. The suppressed premise is that crack stimulus is a good thing. We're supposed to see that and say "oh, it works". We usually start seeing these stories a few days before our dealer delivers a new strain of crack cocaine to the markets. The talk is still that our Uncle Ben is leaving us and no one wants to say "goodbye" with a shitty gift. Ben may buy more bonds this round than last round. It's altogether possible to see that 1470. No matter how much Uncle Ben says that it has to last the bulls are gonna throw themselves a little party. Ain't no one going home until the last line is snorted off the belly of a prostitute. But that's when everyone starts coming down. You've seen Fear and Loathing in Las Vegas. "Holy Jesus. What are these goddamn animals?" And then there's your sell-off.
ReplyDeleteKeep watching VIX 15.79, if it drops thru, then the wine is flowing like water for the bulls. If VIX does not drop under 15.79, bulls got nothing.
ReplyDeleteKeystone, what a great read! Really, really informative. I never thought of the fact that QE3 hasnt worked yet, since it was already priced in by then... However note that the first real badge of money wasn't printed until... Yep you guessed it mid-November. But I agree that a lot of this propaganda is counter productive since it cause the markets to price it in and once that's done then there's not much to rally for except for a a day or so. The markets are looking rather ST term tippy toppy and I expect a pull back before any new highs. The overlapping nature of the waves in this uptrend make me wonder if we'll see new highs. Given that QE4 is now also priced in pretty much only the cliff hangar is left. Once we got that cleared out too the market can go back to earnings and those will be dyer.
ReplyDeleteArnie