Wednesday, February 14, 2018

INDU Update -- Fed Chair Powell to Market: You're on Your Own

I'm going to hold off on the "long, detailed, and educational" article until Friday, but here's a little teaser:  Folks who aren't aware of the strength of the tie between the Federal Reserve and the equities markets will likely find Friday's article enlightening.

In the interim, though, I did feel it worth mentioning that yesterday, new Fed Chairman Jerome "Powell to the People" Powell (I'm still working on a nickname for him, this is a work in progress.  Bernanke was "The Beard."  Yellen was "Gellin' Like Janet Yellen."  Powell's current nickname is tentative, and may need revision...) stated something I found very interesting. 

He said that the Fed would "remain alert" to market instability.

This is probably best-translated as a message to the market, saying:   "You're on your own unless things get much worse."  

Which is where I figured we were at this stage.  I don't believe the Fed is eager to save investors from themselves at this juncture, and likely views the current decline as a "healthy" correction.  In other words, bulls who are hoping for a stick-save from the Federal Reserve will probably find that one is not forthcoming at current price levels.

In any case, in terms of charts, I feel reasonably confident that the decline is not over yet in the bigger picture.  But over the short-term... I feel less confident about this market's short-term intentions than I've literally felt in months.

Accordingly, we're just going to stick with the single "all roads lead to Rome" chart.  Last update expected the market to rally up to the (b)/ii label and stall, and so far it's done exactly that, which has resolved nothing, left all options still on the table, and even created an additional option.  (In other words:  I expected this much (a rally to (b)/ii and a turn) -- so hurrah for being right about the very short term -- but my real question was "what next AFTER this?") :

In conclusion, the market is keeping all its options open at the moment... well, except maybe the option for new all-time highs immediately.  That still seems quite unlikely.  Hopefully things will clarify more over the next few sessions.  Trade safe.

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