SPX and BKX: The Federal Unnerve

On Wednesday, the market rallied like crazy after the Fed announced that it was going to cut interest rates by (to quote Fed Chairman Jape Owl) "over 9000."  In light of this shocking news, a blistering rally was the only logical response, since a rate cut of that magnitude would, of course, cure cancer, end death, and lead to the Earth maintaining a constant year-round temperature of 72-degrees.  All of which would be good news for a pseudo-wartime economy that's increasingly driven by ever-expanding public and private debt.  Though, to me, it seems a never-changing climate would negatively impact the government's rhetoric war against the natural climate and the public debt/"boosts to GDP" (wink wink) incurred in the name of "saving the planet by eliminating plant food (CO2)!" but the market took it as good news anyway.

And who are we to argue with the market?  When a rate cut over 9000 comes along, it can only be good news.  Hang on a second, I've just been handed a note from my editor...

Er, according to this note, the Fed didn't cut rates at all!  I apologize for the error and wou...

NOTICE: In accordance with 1984 US Code § 2fu,

THIS BLOG HAS BEEN SUSPENDED

BY THE U.S. MINISTRY OF TRUTH

FOR SPREADING DISINFORMATION

Ha ha!  Just kidding, of course!  I think!  Felt like engaging in a little "this-is-the-actual-direction-America-is-headed" humor while we still can!

Anyway, the Fed kept rates steady, making last update's commentary ("No matter what the Fed does, even if what it 'does' is nothing at all, the market typically reacts like this is earth-shattering news that has either appalled or amazed everyone on the planet.") interesting in hindsight.  

Last update also noted that we were "still in 'nothing particularly bearish has happened yet' territory" and that "given the sideways nature of the near-term market and the fact that the larger trend is still 'up,' the onus remains on bears to get something going."  So, Wednesday's rally was not a terribly unexpected outcome, though its ferocity may have seemed (or been) a bit overboard.

Chart-wise, BKX finally reached its months-old upside target:

And for SPX, it appears the prior sideways grind was probably a fourth wave triangle, which in turn implies the current rally is a fifth wave (degree unclear), so bears might get at least a little relief in the not-too-distant future.  Worth a mention that it almost reached the conventional triangle target already, and one more high would hit it... but this market is so gonzo that it's tough to say what it will do (other than continue the trend) unless/until we see an impulsive turn.

That's about it for today.  Trade safe, and don't let the Fed bugs bite.

SPX Update: Fed Day

Today, the Fed will emerge from its bunker to announce what it's going to do about interest rates.  A fair number of people seem to be expecting the Fed to start lowering rates "any minute now!" (the same people have been expecting that for roughly a year now) but that still seems premature to me.  I suppose we'll see.

No matter what the Fed does, even if what it "does" is nothing at all, the market typically reacts like this is earth-shattering news that has either appalled or amazed everyone on the planet.  As a result, Fed days can be both treacherous and fun to trade -- and sometimes outright hilarious, as they reveal the irrational nature of humanity and its construct known as "the market."

Chart-wise, we're still in "nothing particularly bearish has happened yet" territory.  In fact, nothing at all has really happened, other than a sidewise grind.

In conclusion, given the sideways nature of the near-term market and the fact that the larger trend is still "up," the onus remains on bears to get something going.  Since today is a Fed day, there is, of course, always the chance that today becomes their opportunity.  Trade safe.

SPX Update

On Friday, bears finally managed to get below the blue trend line, but as I wrote in the last update:

at this point, it's not impossible for the market to drift sideways through it without doing much technical damage, which is why I (today) added 5119 as relevant; probably even more relevant than blue now. Though even 5119 isn't unrecoverable for bulls, sustained trade beneath it would at least be a "start" for bears.

Thus, today will probably determine if bears are going to do anything with the situation:

Really, not a lot to say beyond that and everything I've said over the past weeks -- for now.  Trade safe.

SPX Update: Two Wrongs Don't Make a Right, but Three Rights Make a Left

Since last update, SPX again tested the previously noted blue support line, and it again held:

On March 11, I called out the blue line as the first zone bears would need in order to start turning things a bit more in their favor, and the market has since shown the value of that line -- however, at this point, it's not impossible for the market to drift sideways through it without doing much technical damage, which is why I (today) added 5119 as relevant; probably even more relevant than blue now.  Though even 5119 isn't unrecoverable for bulls, sustained trade beneath it would at least be a "start" for bears.  Trade safe.

SPX Update: Title Goes Here

Not much to add market-wise since Monday's update, so I've just added a few comments to the short-term SPX chart:

The next version steps out one degree to examine the trend lines at the next larger time frame:

Not much to say beyond that today.  Trade safe.

SPX, COMPQ: Putting Out the Fire with Gasoline

I normally don't comment on the machinations of politicians, but this is relevant to the market, particularly as it relates to the Fed and to inflation.  

In his State of the Onion (a million years ago, when my little sister was just learning to read, we were in the car one day and she was trying to read every business sign we drove past.  We passed "Union Bank" and she dutifully recited, in her monotone, "Onion Bank" -- and my parents and I laughed.  But, unbeknownst to me at the time, my sister had unwittingly doomed me to constantly call union "onion" for the next 40 years and counting.) Address (yes, we're still in the same sentence here!), Biden proposed that "instead of waiting for inflation to come down," he wants to give away a bunch of money to homeowners and wannabe homeowners (i.e.- presumably to everyone) immediately.  

Most of us who didn't flunk Econ understand that flooding the money supply with more dollars is the exact thing that causes inflation in the first place (see: Covid stimulus, Fed printing, etc.).  Printing more money without a corresponding increase in production doesn't create wealth for the same reason that printing more first edition Superman comics would drive the value of each comic down:  The more abundant a resource is -- be it comics, gemstones, or cash dollars -- the less each unit of that resource is worth.  For this reason, printing money only makes existing dollars worth less (new money, without production, has no choice but to steal a portion of the value from existing money, which is the one and only reason newly-printed money is assigned any value at all).  We experience this at the ground level as goods and services costing more -- aka: inflation.  But really, goods and services haven't gone up, the value of our cash (and our savings, and our wages) has instead gone down, so it takes more dollars to buy everything.

Anyway, this proposal, were it to pass, is a sure-fire way to create more inflation.  And probably to drive the cost of housing up even further in the process, to boot.  Hence today's title.  To frame "more free money" as some sort of solution to inflation is akin to suggesting that more water is a solution to drowning.  So, it may be relevant to keep an eye on whether this proposal gains steam or not, because if it does, it will likely force the Fed to keep rates higher for longer.

Market-wise, we had a down day on Friday, coincident with COMPQ hitting next resistance -- but bears still have work to do to make it more than that:

COMPQ first:

SPX, which discusses what bears would need to do next:

And, just because it's out there, a little discussion on some bigger-picture bull and bear options:

That's it for today.  Now, using politician logic, I'm going to go conduct an experiment to find out if pouring more water in a clogged sink will finally stop it from overflowing.  Trade safe.

SPX Update: The Trend is Your...

On February 26, I wrote: 

[T]o my way of thinking -- at least for the time being -- it's just a matter of following the trend until we get another impulsive decline to signal a possible short-term (or longer term, if it's a larger impulse) trend change.

And there's been no change to my stance.  So there really hasn't been a whole lot to say (since I don't like to repeat myself too often) in the weeks since.

Last update noted that SPX had finally formed an impulsive decline, but also that there were reasonable odds it was just the C-wave of an expanded flat, and hence the end of a correction and not the start of one.  The indicator that bears would have needed (in order to tilt the field their way) was a break below Tuesday's low, but that never came:

Beyond that, not much more to add, still... for now.  Trending markets can be a bit boring.  As the old saying goes, "We contend:  The trend that's your friend may extend and append, so don't condescend lest your bowels distend."  Or something like that.  Trade safe.