Wednesday, June 17, 2020

SPX Update: Short and Sweet

Since last update, the Fed decided it couldn't stand to see even a small (relatively-speaking) correction, and stepped in to announce that it would henceforth be buying anything and everything, including (but not limited to):  Bubble gum, used toiletries, and recycling (cans and glass bottles ONLY -- even the Fed has to have standards!).

Some people say this is a bad thing, but I, for one, am looking forward to the rise of Fed Recycling Centers, where you will be able to exchange a bag of aluminum cans for eleven trillion dollars.

This announcement came in the middle of what is currently presumed to be a second (or B-wave) bounce.  As we discussed in the prior update, there appeared to have been five waves down, which marks a potentially-complete structure -- and thus often (but not always) leads to a counter-trend move.

That said, the Fed always makes bears a little nervous, and with good reason:  They can and do sometimes "mess with" the apparent wave structures.  The Fed represents something of an anomaly, in that when they add massive amounts of liquidity, they are coming in from OUTSIDE the previous structure, and thus not necessarily subject to the normal rules of the structure.

Accordingly, I've written "with caveats" on the chart.

In conclusion, normally, we'd be reasonably confident in another leg down, but due to the Fed intervention, we'll trade what we see, but cautiously, particularly if the market moves much above the red (1) high.  Trade safe.

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