By Andrew Nyquist
Well the Fed has spoken again. And Gentle Ben has left every door ajar in hopes the market will party on: “the economy has been expanding moderately” and “labor conditions have improved further,” yet get this “The committee expects to maintain a highly accomodative stance for monetary policy.” What? I mean, did you expect anything else? They have to leave a crack open for endless QE, don’t they? …Just kidding.
They always play this game, feeding the market a carefully crafted statement in return for a pat on the back. And, as most are aware, the patient loves the drugs (i.e. QE). Just look at the markets hop higher!
But in the game of making money in the marketplace, a key question remains: Will the Fed’s carefully chosen words keep the wall of worry in tact, and more importantly this precious election year bull move alive? Or will it just lead to a short-lived jump higher? Well, so far, so good on the higher part…
Let’s look at the technicals to understand why 1380 on the S&P 500 is an important toggle for bulls and bears on an intraday and closing basis. Well first and foremost, it’s near the February highs (as well as the highs recorded last year). But looking through a shorter term technical lens brings out a more significant finding. The S&P 500 is threatening to overtake the extended broken first tier trend line currently around 1380 (and with force). The bulls are leading the charge and pushing for a close back in the channel… with follow through in the days ahead. On the flip side, the bears want to defend the backtest line and avoid back to back closes above 1380 in the old bull channel — so far the bears are losing this battle.
Often times when the pendulum swings out of and back into a trendline channel, it tends to do it with force and run to the high end of the channel — this could lead to a runaway move well above 1400. If this is the case, will it be a final move higher? Ride the burst higher, but play safe with stops. Ready for triple witching?
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Position in S&P 500 related short fund SH.
Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of his employer or any other person or entity.
