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Wednesday, 15 March 2017

Fed Schmed

I always find Fed days a bit strange. The markets seem to hang on the words of an institution that doesn't actually control interest rates, which are set by the bond markets primarily on the markets for ten and thirty year treasuries. The Fed also doesn't appear to employ any decent analysts to at least give them an idea of where bond yields might be heading, as shown in the bond bear massacre in 2014 at the end of QE3, where the Fed managed to convince almost everyone that the big rally on bonds that was obviously coming in 2014 would in fact be a big decline.  If you'd like to read about that amazing train wreck then I was writing about it in the second half of a post in May 2014 and you can see that here.

Regardless of the ongoing mystery of why anyone still takes the Fed seriously, especially on a day where it seems that they have trailed this modest rate rise so heavily that everyone assumes that the probability of it happening today is close to 100%, and which in any event is just a case of them raising rates from almost zero to a little more than almost zero, I am posting an apposite Monty Python clip in honor of this non-event, though obviously I flatter the Fed with this implied comparison:
Back on Earth the break up of the SPX falling channel was confirmed with a break up through channel resistance on the matching channel on ES. In this context this kind of channel would generally be a bull flag on the bigger picture, with a minimum target on a break up at a retest of the flagpole high, at the ATH in this instance. Adding to that is that the low on SPX yesterday was at rising wedge support from the early Nov low. If that holds then the retracement low is made and SPX is on the way back to retest the all time high, with the obvious target within the rising wedge at wedge resistance, currently in the 2415 area.

Stan's looking for a rally and fail here, possibly as high as 2384 ES (2387 SPX area). For my part a fill of the open gap from the close last Friday at 2383.12 would have me wondering very seriously about that ATH retest. If this is just a short term rally then I'd be much happier if that gap remains unfilled. SPX 60min chart:
On the daily chart the close yesterday was a tiny 0.7 under the middle band. For me I count a close anywhere within two handles of the band as a close on the band, so that wasn't a support break. The middle band is currently in the 2368 area and was tested on the opening spike down. Wedge support is currently in the 2360 area. SPX daily chart:
As of now the ES weekly pivot has been converted to support and ES is rallying. Watching that open gap on SPX, roughly in the 2380 area on ES. ES Jun 60min chart:
NQ is the weakest so far today and still in the strong resistance zone 5390-5400. If that breaks Stan has a target slightly higher at 5420. NQ Jun 60min chart:
Since I capped the TF chart earlier TF has shown real signs of life and is now trying to break up from a double bottom with a target in the 1393.5 area. That needs a sustained break over 1373.25 and TF is still working on that.  TF Jun 60min chart:
The really odd thing about Fed days is that even though the news is often just what everyone expected, there are nonetheless impressive spikes up and down on SPX/ES. Unless the setup is very clear these are best avoided IMO. We'll see where the tape lands after the Fed at 2pm. A break below wedge support in the 2360 area would be an important support break. A fill of the open gap from 2383.12 would invite a retest of the SPX all time high.

Stan and I are doing a free public webinar on our 'Big Five' group of AAPL, AMZN, FB, NFLX and TSLA at theartofchart.net an hour after the close tonight, and if you'd like to attend you can register for that on this page here.

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