S&P 500 - September 23, 2009

A Fed spike that kicked the giddy bulls in you know where. Now, that’s something we had not seen for a while. Didn’t Benny say that he would print till he’d run out of ink?

One problem might be this verbiage that was emailed to me from what the Feddies had said

To provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve will purchase a total of $1.25 trillion of agency mortgage-backed securities and up to $200 billion of agency debt.

So far so good, right? But then this

The Committee will gradually slow the pace of these purchases in order to promote a smooth transition in markets and anticipates that they will be executed by the end of the first quarter of 2010. As previously announced, the Federal Reserve’s purchases of $300 billion of Treasury securities will be completed by the end of October 2009.

Say what?

No more green droppings from Benny after October 2009? How are they gonna bid the tape up? With what?

They seem to be trying to appease different groups with not necessarily the same interests. Beside, from words to action, who knows what can happen?

Aaaah, I never understand these things. Charts are easier.

One problem, on the charts, may be that we had a complete wave set and market did not want to extend.

In the previous post, I said that we had enough for a wave 4, and that marked the low of minute wave 4.





Today, we had enough for a minor 3. You can clearly see 5 waves from the low of September 21, culminating into the Fed show. I thought it was a shortable peak. My stop, for now, is a new high. No ifs, buts, prayers, maybes, just a new high.

I must say that, even if my count is correct, I do expect the correction to find support around 1040-1050 if not higher. So, as things stand now, I regard the short as a speculative trade (a casino play) and nothing more.

One reason I thought a speculative short with a tight stop would be warranted, other than the fact that the gambler in me doesn’t let me be, is that there is an outlier of a possibility that we have completed a higher degree wave pattern.

This is a 60-minute chart of the index

Notice the alternate count. It is technically possible. We have good bullish sentiment everywhere. We also have hoards of reformed perma bears who just seem to have accepted (after a 400-point run) that markets can rally in spite of what the fundamental data might say.

I have a lot of doubts about the alternate count of the chart above. I just thought that it was enough of technical possibility to warrant a casino play with a tight stop.

We will know much more as we observe price behaviour in the hours and days ahead.

For the day, volume was below average, but more than yesterday.

On September 16, I though the broadening pattern was toast. But bulls could not do much for the ensuing days and the action today revived the pattern. So, once again, we have opposing patterns, one bullish (Inv H&S) and one bearish (Broadening top). Daily action can bore the hell out of us on some days, but charts are always interesting.

Daily breadth was not good; it turned really bad after the Fed spike

I count today as one distribution day. It needs a follow through on expanding volume

McClellan Oscillators does not look very hot at the moment. Further deterioration in breadth can help validate out count that we at least have a minor 3 wave in place.

Nas100 dropped on heavier volume than S&P

One day drop after a Fed show and a wave set completion does not say much. Bears need more. For starters, they need to showcase a follow through drop on good volume and bad breadth.

Resistance is 1061. Support is 1041.

Short term trend may have turned down. Mid-term trend is up. Long term trend is down.

Have a Nice Day!