March FOMC, but not what you think

Conventional wisdom holds that the stop-run from today is another spike that will reverse in a couple of days, so we can finish up a wave 3 down to somewhere around 2250 on the S&P 500.

I want to suggest something a little different, that we are drawing a larger-scale leading-diagonal on the chart, that we are in a wave 4, to correct the crazy crash wave we may have finished today, headed to 2520.  The move up was so strong that it left us only 10 pts away from overrunning the .382 retrace within the wave 3 structure.

We may sell some of this off, but I don't think we will give it all up just yet.  January sets up to let this wave 4 play out, with most of the gains already in the bag from today.  We are still within the narrow channel of the wave 3 dive, but it will only take a few days and a bit of rally to break us out of it.

January then becomes frustrating wave 4 chop, eating put and call buyers alike, since the VIX is still high, until the FOMC at the end of the month.  The Fed is all that matters now in our credit-bubble asset "markets", so why not make all of the significant turns Fed meetings?

The channel puts us right at 2152 into March FOMC.

SPX daily, leading diagonal proposed

edit: adding the classic extended W3 scenario, so we can watch this bounce carefully.

SPX hourly  classic extended W3

Fed Austerity will slay the petro-Yuan

China threw down the gauntlet this past week, announcing detailed plans for launching a petro-Yuan, oil priced internationally in their pretend currency, instead of ours.

This will, of course, destroy the $USD and put the Fed out of business overnight.  However, there is a solution to this problem -- austerity.  The Chinese banking system is so overextended and utterly impossible, that the plan ahead for us must be to ruin it, and collapse their economy, before they can destroy what's left of ours.  We must show them who really runs the Empire, or risk losing it all.

The S&P 500 will also be a casualty here, but we have re-capitalized the banks (right?) and FAS-157 guarding them anyway, so we can and will win a brutal war of financial attrition against the Chi-coms.

The current channel, and wave similarity, suggests maybe 2611 SPX into the Wednesday Fed meeting.  Then we will need a very stern policy statement from the Committee to get the ball rolling.  Nominating Taylor as the next chair would help as well.

This builds into larger waves to retest the 1800 SPX area and set us up for wild times in 2018.

The Fed can't fuck around any more with the petro-Yuan on the drawing board.  They need to throw the incredibly improvised and brittle Chinese financial system right into the hopper, their society into chaos, watch Xi lose the Mandate of Heaven, and secure the place of the $USD if for only a few more years.

We can do this.

Rate hikes will be market-bullish events

At the moment, the strength of the $USD correlates very strongly to equities.  When King Dollar is torpedoed like it was yesterday, stocks plummet.

So does this mean that a rate hike next week will be tremendously bullish for stocks?

The argument runs like so:

1. Fed tightening will shoot the $USD through the roof
2. Beaten-down currencies like the JPY will crumble again with respect to the Dollar
3. The Yen carry trade and everyone riding on it will launch equities to new highs

When the market falls off its highs in January, the Fed can then rally equities by ... adding another 25 bps.

And so on, until the correlation shifts again between USDJPY and equities. 

SPX highs into EOY 2015

This of course begs the question -- is the Dollar actually on the brink of collapsing today, with the Fed now forced to defend it with a series of rate hikes?

The conventional wisdom of "one and done" or "no hikes at all, ever", may be completely wrong.

2016 may be about the Fed scrambling to regain control of the monster they have created, where the market bounces at each FOMC (against the overall decline) because they continue to tighten.  Between hikes the market sells off again with increased severity as the market comes to grips with what is happening.

The Fed hand may be forced.

The new game may be for each nation to export deflation to the rest of the world.

Janet Yellen: Just Do It

The equity market bounce has given you a free pass to hike, if only a little.

25 bps today will keep everyone on their toes.  Then you can stand pat in December and let them know you hear their concerns, etc. etc.

Charts 05-22: the "Force Janet Yellen's Hand" scenario

Two hours to go before the Memorial Day weekend, and we are hanging in here stubbornly.

We've moved sideways through a couple of support trendlines that have now been slowly, gradually stressed and broken, but the market is not yet ready to head down.

The daily SPX upper Bollinger, the lower daily VIX Bollinger, are untouched and probably unlikely to be tagged into the close today.  So far, these technical indicators have served us well to know that we have not yet reached the end of this.

The two most likely events that can roach the market and bring the return of the bear would be a suprprise hard default and exit from the Eurozone of Greece, and a 50 bps or better rate hike at the mid-June FOMC meeting.  Assuming that the PTB can keep Greece on ice, then let's consider that the equity market hangs in here until the FOMC, all-but-forcing Janet Yellen to declare victory and discontinue ZIRP (for now).  ZIRP will certainly return, but under much more desperate and frightening circumstances.

Here's a proposed ending-diagonal scenario that completes into the June Fed meeting, at the 2145 level on the S&P 500.

ending-diagonal into June FOMC edition

EDIT: after looking at the DJIA for corresponding waves, I added a second count in red that would have us finish up an ending-diagonal after the first week of June, presumably on Greek troubles.

June rate hike, please

Please, pretty please.  Janet, I'll send you a Starbucks gift card, good for a latte or baked goods, or -- what the heck -- why not both!  Treat yourself right.

SPX 1Y head & shoulders top 3PDH etc etc ceteris paribus ad infinitum

Pay attention to the tape

from the Thirty Years War

Pay attention to the tape -- we're at a very important juncture here.  Not only did we turn down hard on an intraday rejection of the top of the megaphone since July, but the everything since the top has been very deliberate -- and free of gaps.  Did you notice today that the drop to 1982 was a perfect fib 1.62 times the first leg off the top?

We're setting up for much larger moves in 2015.  First, looking for us to wrap up the wave count with a 1954-ish low into FOMC this week, and a bounce into Christmas.

SPX 12-15

The larger count to return us to the 1080 SPX area over Spring, with 3PDH labeling:

SPX 12-15 3PDH

And a quick look at UVXY, which was instrumental in identifying the significance of our rejecting the old megaphone upper trendline.

UVXY 12-15

GLTA ...

How the market can reach 1233 SPX by the end of January

The bear trendline for this drop is already in place.  Surely it is the end of days!

I don't know if we'll put in a new low under 1925 SPX this morning, but I'd like to see us close the week at 1948.  This will clear the table of the 195 SPY puts I should have held on to ... grrr ... oh well, plenty of good trades ahead.

A lower trendline from the waves already in place takes us to 1233 SPX by the end of January.  The Fed will accomodate, you better betcha, and we will bounce 300 handles back up (.382 retrace) into the Spring.

But first for the crash call.  Big picture with the bear trendline and surprise support from a triangle from 2011.

SPX 10-09 4Y

It starts this fall with a series of breathtaking drops to key support levels: 1814, 1737, 1560.  The crash leg in January kicks off right after Christmas on the 12/26 Bradley turn, as everyone tries to secure year-end profits.  This quickly gets out of hand!  ONOZ OMG ...

Bounces are typically .382 of a previous larger leg, and they also correspond to corrections we experienced on the way up this thing.  Yes, these are all 3PDH numbers as well, you know the drill.

SPX 10-09 6M

Short-term -- I'd like to see that close at SPX 1948 today.  We can make it as high as 1962 into Monday if there is a B-wave triangle playing out here.

The question re the drop from 2019 to 1926, whether it counts as a 5-wave impulse or not, is moot.  Call it "A" and be done with it.

SPX 10-09

First important support is at 1814 SPX just after October opex.

Is this our long-lost 5th wave?

We have been waiting patiently for the complement to the 40-handle minor W1 move from 1904 to 1944 on the SPX, which took place over about 1.5 days.

This morning looks impulsive, and a similar W5 here would time well for a new high right into tomorrow's FOMC.  The overall shape up here is a classic broadening-top (megaphone).

After that?  The 200 DMA on the SPX lines up nicely with an early-October cycle-low (Bradley, Full Moon etc) turn.

GLTA you crazy kids.

SPX 09-16 a.m.

Charts 09-10: FOMC lining-up well for a top

The larger channel defined by the 2-4 trendline here has its center right at SPX 2023 at 2:00 PM on FOMC day next week, which would work well with W1-W5 similarity and the daily Bollingers on the S&P.  Upward chop until then.

SPX 09-10

The lower Bollinger on the UVXY vol ETF bottomed at 18 last week and has come in quite a bit to just over 21.  I would love to see VIX die into the wait for FOMC next week and to pick up UVXY under $22.

SPX 2034 as a candidate top

There is a post and some discussion over at Daneric's about 2034 SPX as a possible target for this awful thing.  Everyone has got ideas and charts and technical voodoo on the market, which is the whole point of blogging it all and keeping the conversation going.

What makes the 2034 SPX level interesting for me is that it nails the top of a long-term and very important trendline -- right on FOMC day, September 17th.  This fits with a crackpot theory of mine, that the market will not believe the tightening rhetoric at all from the Fed, until it is forced to do so by having cold water splashed in its face.  Only then will it react -- hard.

Going forward, FOMCs may be increasingly bearish inflection points.  We could see an actual rate hike as early as the January 28th meeting.

We have some time to kill before September FOMC, so I'm proposing an ending-diagonal triangle for the final waves up to the top.  A terminal pattern is badly needed here.

SPX 8-29 30D

From September FOMC, we would return to the SPX 1904 level again for another bounce off the 200 DMA and a final kissback / rejection of the old rally channel (a pink line on my chart).

Here's the move down from 9/17 FOMC to a big turn window around the October Full Moon.

SPX 08-29 60D

I've rehabilitated the nested-double-Three Peaks and a Domed House patterns here as well.  It's good to have them both back on the charts.  Remember, FOMCs going forward are market panic-attacks.

SPX 08-29 1Y 3PDH

This builds up to the January 28 FOMC, where a (surprise?) minor rate hike signals an end to the freebies and crashes the market back to 1074 SPX into May.

SPX 08-29 4Y

And the crash into May ... is only "A" down.  Good times.  Until we get an actual top, I like the shape and timing of this highly speculative model.