Hi all!
In yesterday's post I discussed the optimism of the market following the FOMC meeting. Praises were sung by the bulls for the low interest rates - the rates incapable of fighting inflation - because that meant the market could rally and continue to move higher. I discussed the day ending on a triple top, and the idea that a reversal could occur the next morning.
Wouldn't you know it, the market gapped down overnight and panic selling continued through the morning as the bulls sold to secure their winnings. If we look at the previous meeting from March, we can see that this has happened before. The rally shows overbought and people want to take profits. But after profits are taken and the bulls are satisfied, where does the market go?
After the last meeting, we show that the market continued to rally after its retracement, and found even higher places to be through the rest of March. If this meeting's rally is anything like what we'd seen before, we could see the SPX head even higher, completing an Inverse Head and Shoulders formation. Another telling sign is the false breakout on the channel's lower trendline. The market tried to bottom out of this channel, but we saw major resistance pushing things back up. We could retest 4300 by Monday, and if successful, rally higher into the channel top.
Though I am bearish in the longrun, and expect Powell and the fed to pivot (yet again!) on their low interest rate increases - possibly sending the market into a recession when the high rates have to come out quick - but now is not that time. We still have enough momentum in the market to complete one last climb in the market before we slump down to recession lows. But this last climb may not make it to the channel top, instead fizzling out sometime before then.
Bears, don't get burned trying to fight the Fed's rally.
Bulls, be careful out there- it's a long way down.
Everybody else, what do you think?
In yesterday's post I discussed the optimism of the market following the FOMC meeting. Praises were sung by the bulls for the low interest rates - the rates incapable of fighting inflation - because that meant the market could rally and continue to move higher. I discussed the day ending on a triple top, and the idea that a reversal could occur the next morning.
Wouldn't you know it, the market gapped down overnight and panic selling continued through the morning as the bulls sold to secure their winnings. If we look at the previous meeting from March, we can see that this has happened before. The rally shows overbought and people want to take profits. But after profits are taken and the bulls are satisfied, where does the market go?
After the last meeting, we show that the market continued to rally after its retracement, and found even higher places to be through the rest of March. If this meeting's rally is anything like what we'd seen before, we could see the SPX head even higher, completing an Inverse Head and Shoulders formation. Another telling sign is the false breakout on the channel's lower trendline. The market tried to bottom out of this channel, but we saw major resistance pushing things back up. We could retest 4300 by Monday, and if successful, rally higher into the channel top.
Though I am bearish in the longrun, and expect Powell and the fed to pivot (yet again!) on their low interest rate increases - possibly sending the market into a recession when the high rates have to come out quick - but now is not that time. We still have enough momentum in the market to complete one last climb in the market before we slump down to recession lows. But this last climb may not make it to the channel top, instead fizzling out sometime before then.
Bears, don't get burned trying to fight the Fed's rally.
Bulls, be careful out there- it's a long way down.
Everybody else, what do you think?
