Wednesday, March 16, 2016

SPX and BKX: Casual Fed Friday

Today is the long-anticipated Casual Fed Friday, and the Fed is expected to announce whether it will raise rates or not while dressed in shorts, sandals, and Hawaiian shirts.  Pundits can't agree on what the announcement will be, but many do agree that the vast majority of pundits disagree with each other. 

As to what the Fed will do, some fundamental analysts have been "looking deeper" for clues, even going so far as to analyze Janet's latest choice of breakfast foods.  It's come to light that, more and more, Janet has been having eggs for breakfast, and many analysts feel this is bullish, because eggs are fragile, and they remind Janet that the market itself is fragile.  Others have suggested that Janet is cracking eggs lately as a form of "mental preparation" for bursting the market's bubble. 

Never mind, I guess there's no consensus there, either!  We may have to look for clues in even more inane places, such as in the verbiage from the last Fed minutes.  But that would require me to actually read the Fed minutes, and I have a tendency to develop migraines these days, so I'll leave that to the pundits. 

Frankly, I miss Bernanke.  That guy not only had a beard that wouldn't quit, but he was incredibly easy to predict.  I think I was batting .900+ on my predictions of what the Fed would announce under Bernanke.  But I don't even bother trying to predict Janet, probably because she lacks a viable beard.

Anyway, the wildcard for the market right now is whether the ECB and BoJ's negative interest rate policy will send enough cash into U.S. markets to reinvigorate the bull, despite Janet and her egg-cracking.  I can't answer that question, but it is a consideration to... consider.  ("Allow myself to introduce myself.")

As discussed last update, the market has managed to work its way into an inflection point -- and, yet again, this seemingly-important inflection hits just in time for Fed Friday.  What a coincidence!  Amazing how often the "random market" manages to do that.

There's really very little to add to the last update, except to again reiterate that multiple markets are now up against more significant resistance.  Below, I've updated a long-term BKX chart that has served us well over the past three years.  This chart underscores the significance of the current inflection point:

SPX did form an implusive decline from 2024, although the top is messy enough that I can't be certain it's not the C-wave of an expanded flat.  If it's the c-wave of a flat, then bulls need to hold 2005 -- if that fails, then the impulsive decline was wave A or 1 down.  And in the event the impulsive decline from 2024 is wave A/1 down, then I'd watch 1995 +/- first, and 1982-86 second as potential targets.  If those zones fail to offer support, we could drop toward 1969-73.

Below is a simple near-term support and resistance chart for SPX:

The market hasn't done much since last update, with multiple markets still testing meaningful resistance -- so I'll simply reiterate the conclusion of last update: 

On the bull side of the coin, to this point, resistance levels have proved to be only short-term challenges.  Nevertheless, the current levels, and the zone just north of here, are potentially a more significant degree of resistance than the rally has faced so far, and thus should be a more significant test of the rally's true strength, or lack thereof.

Trade safe.

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