Diary of a Financier

FOMC pregame: SPX setup

In Capital Markets on Wed 18 Sep 2013 at 12:19

Just a quick note on the equity market’s behaviour heading into the FOMC meeting this afternoon, at which the Fed is expected to announce a taper of QE.

Longer-term $SPY fractals still show a primary rising wedge pattern with trendline resistance >$175 (+2.5% from intraday levels). In SPY’s daily stochastic and MFI, you can also see important bull reversals out of those cumbersome 2x bear divergences I’ve continually monitored. The MFI’s breakout, in particular, is a signal I’ve expected and awaited since this summer. In time, MACD should join that brigade, adding momentum to this rally:

SPY daily/weekly/monthly

SPY daily/weekly/monthly

In terms of the very short term (heading into the FOMC announcement), intraday fractals exhibit a very cautious setup. 1-minute and 30-minute charts show a fulcrum top approaching right shoulder support ~$170.4-170.6 today, beneath the yoke of 2x bear divergence. The 1min is already showing early signs of a bottoming process, with 1x bull divergence bubbling. At least preliminarily, that signal is indicative of a classic rally up to neckline resistance of the fulcrum top at $171.15:

SPY daily/30min/1min

SPY daily/30min/1min

I’ll have to reassess the landscape when we reach that crossroads, because the reaction thenceforth will govern the coming weeks’ performance. In the interim, this fulcrum top should classically recede from that next test of its neckline, but [again] I’m rather biased toward longer-term fractals right now, which recommend an intermediate term SPY rally >$175 (+2.5%)–trendline resistance of the primary pattern, a rising wedge, that’s ultimately a bearish construction for the long term. In sum, I’m focusing on the more reliable longer-term signals, which [in this case, the intermediate term] are bullish.

~~~~

We’ve added more to Japan ($DXJ) already this morning. We’re trimming our Ford ($F) position, as planned, and we’ll likely use additional cash to add to our Russell 3000 Index ($IWV) exposure if SPY reaches down to that $170.4-.6 right shoulder support intraday.

–Romeo

Advertisements
  1. Update…

Comment

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s