All awaiting the Fed-Release! Or is that the Fed-Ease?
With S&P chopping the days away and closing in a series of dojis, one can’t help but think that everybody’s just standing pat waiting for the much talked-about announcement that everybody and their dog expects from the Fed this coming week.
The question seems not to be if all structural problems are solved or not. Nor does it seems to be if economy is recovering or not. It seems to revolve around the amount of bond purchases and the schedule of such purchases by the Fed.
So, with all pretenses of, and desires for a recovering economy forgotten for now, the game is charged on the size of the bags of money that may be injected into the system. If you think that this is a healthy environment and will end in a benign prosperous way for all, I have the tower of Pisa to sell to you.
(Kidding, of course!)
But what matters to us is the short to intermediate course of events and the presence and sustainability of an intermediate trend.
So, we join the rest of the crowd and await the wisdom of the currency makers ;-)
“In the middle of the journey of our life, I came to myself within a dark wood where the straight way was lost.”
– From The Divine Comedy by Dante Alighieri
To try and perhaps avoid being lost and perma-clueless – chasing top after top (or bottom after bottom) against a prevailing trend, I have set myself on two primary tools. A study of money at macro level and a utilization of technical analysis
On the macro level, I can give pages and pages of text and graph, but why bother when I can give you two quotes
“First, the FOMC will strongly resist deviations from price stability in the downward direction.”
– Ben Bernanke, August 27, 2010
“We are going to continue to try to strengthen the recovery under way so we can dig out of this as quickly as we can”
– Tim Geithner, Oct 23, 2010
It is up to the individual player to take these esteemed officials at their words or not. It is also up to the individual player to believe if these esteemed characters can succeed or not.
It is my thinking that at some point all efforts to inflate the debt away with more debt will fail. But I have no idea how near or how far that point is. I can stay to the basics and say that for as long debt is issued in a currency that can be created by the debtor, and accepted by the creditor (or the vendor), the game is on.
That is macro-level fundamentals for you in a nutshell, let’s get down to technicals
This is a weekly chart of S&P
S&P looks overbought. That, in itself does not mean a collapse or even a correction. Markets can stay overbought for longer than we have patience or capital to fight them. Index is in an 1175-1200 band that we have had on the weekly chart for a long time. The resolution of this band may set the wheels in motion for the next trending move. That said, as long as index stays above 2007-2010 trend line, it is either advancing or consolidating.
Other indexes like the Dow and NDX, and some other markets like TSX have already matched or exceeded their April peak. Expectation is for S&P to finally join that club. A failure by S&P over the coming weeks may be a serious inter-market divergence warning.
This is a daily
I can count 9 days in a row with S&P closing around the same area. Sure it has chopped a lot of traders into pieces, but, for a longer term player, not much has changes as far as price is concerned. Mid-line of the blue channel has held every spike and 13 EMA has held every dip – so far.
Momentum seems to be rolling over. It would be good if momentum could cool off without price giving much to bears. Regardless, as long as index stays above 2007-2010 downtrend line, it’s either advancing or consolidating.
Daily volume shrank. Daily breadth was positive
McClellan set of oscillators keep pussy-footing around the neutral level
We have a contraction going on. The break out of this may be sharp and scary to those trapped on the opposite side.
If I were a bull with conviction, I would hope for a break to the downside to drag the bears in and then reverse and ride the shorts up.
If I were a bear with conviction, I would hope for a break to upside to juice the bulls and then reverse and crush the longs on the way down.
I am neither, and as such, I stay hedged and happy :-)
Broader measures of breadth are still OK
I just need to see if the short term divergences in breadth can be resolved without damaging the broader picture.
This is a 60-min chart
The choppy price action has made it hard to choose a short term count over the others. The above is one count out of many possible.
This is another
This is another
I am not trying to confuse you, or me, by presenting multiple count alternates. I am just trying to show why I think relying solely on waves can, at times, be a dangerous proposition. To me if the picture is murky, I should stay open and adaptive. I should also take larger frames into consideration, and that's why I religiously go through weekly and daily charts.
I have been having a lot of success with raising my levels. In many occasions, market came close, but not close enough to take my top level. That meant profit was being built in as levels were raised. This chop, took my top level of 1175 and any portion that might have marked for it. For the rest, hedged and happy -- for now ;-)
A move below 1170-1175 may indicate a possible change in short term trend.
A bit wider, the 1168 and 1187 pivot seem to have been containing the recent chop. It may take a move beyond any of these pivots to give us some sort of a trending wave.
OEW pivot support at 1176 and 1168. Pivot resistance at 1187 and 1219.
Long term trend is up. Mid-term trend is up. Short term trend is chop-chop.
Have a Nice Weekend!
S&P 500 – May 15, 2012 - Bottom Line: Long term trend is up. Mid-term trend is down. Short-term trend is down Weekly S&P stage is Late Advance (2-C) Daily S&P stage is Strong Decli...
1 year ago