Tuesday, June 7, 2016

What if the Fed surprises us next week?

If the algos and everyone else insist on front-running a sure-thing ├╝ber-dovish FOMC, then Yellen may have no choice but to hike while the sun is still shining.

In chart form:

SPX 2016 collapse

Worst-case scenario!  Eat your neighbors!


Bryan Franco said...

Proud supporters of this blog: can we make a pact not to eat each other?

rose2797 said...

I know you are looking for a higher high, does 2122 fulfill the requirement as it will be higher than 2111. or it has to be higher than 2135 thanks

rose2797 said...

does 2122 fulfill the requirement of wave 5, which higher than 2111, or it has to higher than 2135 thanks

Ken Barrows said...

I just come here for good entertainment, but absolutely no way there is a rate hike by the Fed this month. Because the market doesn't care about the "credibility" of the Fed, it just wants the status quo.

Bryan Franco said...

CG- fixed income etfs like IEF and TLT appear to be breaking out of triangle formations, implying this could be a final wave relative to the scale of those triangles.

Christian Gustafson said...

Bicycle emailed me a chart of the 10Y that had a similar triangle, suggesting a breakout that matches a top and turn in equities.

This would complete the move, so question will then be if both stocks and bonds sell off together in the Fall.

2144 SPX the ideal top here for me. (1344 - 1010) + 1810 = 2144 SPX target

rose2797 said...

Cg thanks. R expecting some event to expect that kind of drop. Us election or something else. Have u noticed that today vix and vix products were positive

Christian Gustafson said...

Yup, watching for bottoming formations in ETFs like UVXY.

The daily BB SPX has risen quite a bit the last couple of sessions, so we now have room towards the 2130 level and new highs. We've come this far, we may as well make that new high, and not have a "failed 5th".

And how can Janet Yellen NOT bump rates if the SPX is over 2140?

Her hand will be forced. And we'll get one helluva reversal candle next Wednesday.

The idea of a crash to 666, erasing the entire rally since the 2009 lows in less than 2 months, is anticipated by absolutely nobody outside tinfoil outlets like this one. But with Yellen hiking rates into a recession, who is ready to buy the dip?

Such a crash is not only possible, but will be one of the truly profound and beautiful experiences of our lives, especially if you own index puts.

rose2797 said...

Thanks a lot. This whole rally is on light volume to suck in small investors

Christian Gustafson said...

And I just bought 2 pair of nice Adidas kids hiking shoes for my girls, so we can head out into the shit for hiking trips all summer long.

I bought the shoes from Amazon.com. Excellent prices and service.

Thanks, Jeff Bezos!

Christian Gustafson said...

Grinding our way to a top.

We also want to see a nice fat screaming divergence on the NYSE composite and other indexes.

rose2797 said...

But why some people say if we hit new high the bearish scenario is out the door.

Christian Gustafson said...

Rose, that's the idea that we have tested support and are ready at last to break out of the 1800-2100 range.

There are plenty of Elliotticians, too, who count the 1st leg up from 666 SPX as "wave 1", and think are now looking for the rest of this move for a W5 somewhere north of 2300.

I count the rally off those lows as an ABC, with the C leg finishing up very soon. I will cut a lamb and offer it to the chart gods.

T.Berry said...

@ken, zero reason for a rate hike and the fed is smart enough to know---they have been so far ahead of the curve over the last 8 years. the fed has proved time and time again, zirp works. market is going higher, much higher. stay for the long haul and you win 100% of the time as the stock market ALWAYS comes back. it's really that simple. long term investor always come out ahead. stocks are the place to be.

T.Berry said...

cg, +1000 on 2,300! you will be right again! : ) this secular bull market is only in the 8th year they typically can last 20+ years like the one from 1980 to 2000

it's coming (2300), just a matter of time. true stock market investors have patience and will be rewarded. the only way to stay ahead of the game is to own stocks. hisotry proves that!

Ken Barrows said...


Right you are! History shows that when global interest rates are at a 500 year low, the sky's the limit!

Anonymous said...

"History shows that when global interest rates are at a 500 year low, the sky's the limit!" Yes, the sky is the limit, for oil that is. Oil is up 20% + in the past 3 months compared with a paltry 4.5% for the S&P. In this environment, why would anyone invest in stocks?

sooner said...

Inventories at Cushing are at 10 year highs with oil production continuing to ramp up around the world. Demand for oil is dropping, how high can oil really go?


Anonymous said...

The chart that tells it all.


rose2797 said...

Cg, fed did not raise rated, what now

Christian Gustafson said...

Well, Brexit vote next week obviously the next important event.

rose2797 said...

thanks, but what u think 2144 never reached. is this up wave done

sooner said...

The surprise may have been total loss in confidence in the Fed vs raising rates

Bryan Franco said...

XLF (Financials) has already taken out the low that corresponds to the Mid-May low in the S&P 500. The Financials are obviously of great import to the market. Selling equities here.

T.Berry said...

@rose, there isn't any need to raise. low rates have not hurt the economic recovery at all and yellen remains ahead of the curve. and yes, we'll get past 2144 soon enough, be patient. just my 2 cents

Permabear Doomster said...

re: yellen remains ahead of the curve.

The fed has NEVER been ahead of the curve. They have always been reactive to events.. and hence.. policy changes are always out of date.

Yellen is due to get blanket coverage next Tue/Wed'... and I can't imagine the market not getting annoyed.. as the Fed appears WEAK WEAK WEAK.

TSE said...

Numbers - they are so confusing because there are so many and each one is unique.

The FED will remain solvent longer than you can remain sane.

You may claim " The fed has NEVER been ahead of the curve. They have always been reactive to events.. and hence.. policy changes are always out of date."

LOL! That is YOUR reaction to the actions which have already transpired! Where is your crystal ball - or are you being led by your nose-ring? You have NO CLUE. You are a mere spectator attempting to appear "smart" and "thoughtful". You are out of your league.

(LOL) Any day now it's all gonna come crashing down and I'll be bartering my gold. silver, stocks and bonds for food which will actually fill my belly and keep me alive.... NONSENSE. You'll be dead. D-E-A-D. (me too)

Pray to god almighty that the Fed continues to triumph over the forces of evil in the World and lazy Americans can continue to live the good life - trading worthless fiat for good food and (mostly) clean water, sewage and sanitation. Plus worthless - in the long term - Krap from China which overburdens our landfills.

Buy the dip.

Gotta push the Seneca Cliff as far ahead as we possibly can. NOW GET WITH THE PROGRAM!

Plagues and Epidemics - CG - you may want to add this to your list:



T.Berry said...

we've heard how since 2010 "fed is out of bullets". lol. 70% higher now. fed has pushed all the right buttons. yellen has done a pretty remarkable job so far. stopped the qe and the market has done nothing but go higher. proving qe had very little to do with stocks going higher. the amount of wealth the fed has helped create for the everyday person is historic.

this secular bull is far from being over.

Christian Gustafson said...

Google Finance is showing the lower weekly Bollinger Band at -1.28 for UVXY this morning.

I'll post a scenario tonight for a 75% crash in the S&P 500 this Fall.