Wednesday, June 19, 2013

Morning Charts 06/19/13 SPX /ES

Like I have been saying all week, wait on the Fed and the administration to make their move. Back in '10 and '11 the top calls were so simple cause they told us when QE would end. Are we getting ready to get the signal again? One problem, this time will be different cause now everyone knows about and understands QE and its sole purpose. 

ZH has "Tomorrow Is The Big Daywhere we get, "If the Fed’s economic forecast remains unchanged, the reduction in the amount of QE purchases (a.k.a. tapering ) should commence in September or October.  If the forecast is raised, then look for tapering to commence in July or September.   If the economic forecast is lowered, then tapering is pushed back to December or 2014. " If this is true, the market will not wait to the end of the liquidity flow to nose dive this time. It will commence tomorrow. So, we wait for their direction and then do as we are told. It is foolish to try anything else. 

The minis (/es SPX futures) is to me the best chart to follow right now. It tells the best story and gives the cleanest picture. I did update a few charts in the chartbook last night. You can go there if you want to see more. You can take a peek at this monthly chart to see how improbable the bull's situation appears for further (natural at least) price appreciation. This thing is beyond red lined and has been since 1422. 

SPX 60m - This is the chart from yesterday morning's post. It shows the clear green channel down into critical long term pink support After testing this support twice and setting a double bottom (possible W or IHnS) they managed to crank off another improbable run out of nowhere for no known reason and crack upper channel resistance. 

Off the bottom, they have managed to form an ascending triangle (target 1680), have managed to backtest the busted green channel resistance and breakout of the AT forming a potential yellow rising channel. This all looks incredibly bullish and is a spectacular set up for positive QE news from the Fed. After all, this is what the market has been conditioned to do. BTFD and count on the backstop. But wait, as STB noted back at the 1597 low 1651 was the 61% retracement of the move off the top and the final line the bears must defend. Add to the bears case the 50% diagonal of the rising pink channel. 

That is a whole bunch of stuff indicating two things, 1) the bulls are almost but not quite in total BTFD the Fed is our perpetual backstop mode and 2) the bears are hanging out in the shadows barely clinging to their line in the sand. Right now the bulls have the upper hand, but do they still have hte Fed in their back pocket or will the taper talk become reality. If tapering becomes a reality you will see a 14 handle before you can blink your eyes. If the Fed is still in full blown CTRL+P mode then a 17 handle is still in the picture. 

So, we wait for the Fed to do their thing. Will the minutes have minimal red lines from the past as usual? What words will dominate the word cloud? Will they taper? Not taper? So many questions. Let them play their hand and then follow their lead. I'm  afraid not till the STB event will we get any true downside action, and that will have to be out of their control. 

Have a good day. 

GL and GB!

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