Monday, April 7, 2014

Charts 04-07

The reaction off the top in 2007 resulted in a 30pt selloff on the S&P 500.  We've exceeded this so far, and yet we have barely stirred the VIX and volatility ETFs.

Reviewing the chart, I'm looking for a channel or trendline kissback of some sort, the rejection of which would send us into a proper wave 3 selloff.  The 50% retrace of this 2-day decline is around SPX 1870, which is the lower edge of the old channel, right about the time of the FOMC notes release on Wednesday.  If the meeting notes suggest strong support of the end of QE, and/or regret for having pursued it in the first place, we will roll over and continue the decline, piercing the 1800 level.

The bottom for this first leg should then be around 4/16, before April opex, and after the April Full Moon.  This would give us plenty of time to rally back for the next Bradley turn date due at the end of the month -- right before the next FOMC.

SPX 04-07


Permabear Doomster said...

Now that...I like!

What a dream scenario.

Clearly, just need to contain a bounce <1880/70s, and then break <1840.

If we do trade into the 1780/60 zone, I just wonder how high the VIX might spike. I'd really like to see 22>, which would break the 2013 high.

T.Berry said...

if technicals don't get sp to 2250, ms yellen will. markets seem to agree every time she speaks. 100% long till 2100'ish+

Bicycle said...

Well, we are about to test my theory.

They (Fed) just started walking back their rate rise language.

This is WAY earlier than I expected. Who scared them so much???

I thought they would not be talking back their rate rise language until later this year, or perhaps early next year.

If we are going to hit 2250... it could start happening *right now*. It may put us there by year end at the latest.

That is not a lot of time to make final preparations. yikes

Bicycle said...

Is the recent drop all it really took to scare the Fed away from a rate increase schedule?

They are not going to let the market price in rate increases if the market drops on their jawboning?

This puts the fed in the position of being totally out of control of the situation, as if they already weren't.

They will only be in control of a rate increase, ever again, only if equities will not sell off on the language.

That kind of scenario will not ever happen for them in this environment.

That means the only rate increase they will ever enact, is the one that they will be *forced* to implement. By *something*.

That is the potential catalyst for the next collapse. It will come as a total shock to the market because there will have been no fed language about it beforehand.

T.Berry said...

if you haven't figured out fed runs the markets by now....shame shame...5 years and counting and no end in sights. goldman out today calling for 10% correction this year,,,don't agree,,,downside limited to 1700