Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
Predictive Modeling Suggests US Stock Markets 12% Over Valued - 27th May 20
Why Stocks Bear Market Rallies Are So Tricky - 27th May 20
Precious Metals Hit Resistance - 27th May 20
Crude Oil Cuts Get Another Saudi Boost as Oil Demand Begins to Show Signs of Life - 27th May 20
Where the Markets are heading after COVID-19? - 27th May 20
Silver Springboards Higher – What’s Next? - 26th May 20
Stock Market Key Resistance Breakout Is Where the Rubber Meets the Road - 26th May 20
5 Ways To Amp Up Your CFD Trading Today - 26th May 20
The Anatomy of a Gold Stock Bull Market - 26th May 20
Stock Market Critical Price Level Could Soon Prompt A Big Move - 25th May 20
Will Powell Decouple Gold from the Stock Market? - 25th May 20
How Muslims Celebrated EID in Lockdown Britain 2020 - UK - 25th May 20
Stock Market Topping Behavior - 24th May 20
Fed Action Accelerates Boom-Bust Cycle; Not A Virus Crisis - 23rd May 20
Gold Silver Miners and Stocks (after a quick drop) Ready to Explode - 23rd May 20
3 Ways to Prepare Financially for Retirement - 23rd May 20
4 Essential Car Trade-In Tips To Get The Best Value - 23rd May 20
Budgie Heaven at Bird Land - 23rd May 20
China’s ‘Two Sessions’ herald Rebound of Economy - 22nd May 20
Signs Of Long Term Devaluation US Real Estate - 22nd May 20
Reading the Tea Leaves of Gold’s Upcoming Move - 22nd May 20
Gold, Silver, Mining Stocks Teeter On The Brink Of A Breakout - 21st May 20
Another Bank Bailout Under Cover of a Virus - 21st May 20
Do No Credit Check Loans Online Instant Approval Options Actually Exist? - 21st May 20
An Eye-Opening Perspective: Emerging Markets and Epidemics - 21st May 20
US Housing Market Covid-19 Crisis - 21st May 20
The Coronavirus Just Hit the “Fast-Forward” Button on These Three Industries - 21st May 20
AMD Zen 3 Ryzen 9 4950x Intel Destroying 24 core 48 thread Processor? - 21st May 20
Dow Stock Market Trend Analysis and Forecast - 20th May 20
The Credit Markets Gave Their Nod to the S&P 500 Upswing - 20th May 20
Where to get proper HGH treatment in USA - 20th May 20
Silver Is Ensured A Prosperous 2020 Thanks To The Fed - 20th May 20
It’s Not Only Palladium That You Better Listen To - 20th May 20
DJIA Stock Market Technical Trend Analysis - 19th May 20
US Real Estate Showing Signs Of Covid19 Collateral Damage - 19th May 20
Gold Stocks Fundamental Indicators - 19th May 20
Why This Wave is Usually a Market Downturn's Most Wicked - 19th May 20
Gold Mining Stocks Flip from Losses to 5x Leveraged Gains! - 19th May 20
Silver Price Begins To Accelerate Higher Faster Than Gold - 19th May 20
Gold Will Soar Soon; World Now Faces 'Monetary Armageddon' - 19th May 20
Gold Mining Stocks Fundamentals - 18th May 20
Why the Largest Cyberattack in History Will Happen Within Six Months - 18th May 20
New AMD Ryzen 4900x and 4950x Zen3 4th Gen Processors Clock Speed and Cores Specs - 18th May 20
Learn How to Play the Violin, Kids Activities and Learning During Lockdown - 18th May 20
The Great Economy Reopening Gamble - 17th May 20
Powell Sends a Message With Love for Gold - 17th May 20
An Economic Renaissance Emerges – Stock Market Look Out Below - 17th May 20
Learn more about the UK Casino Self-exclusion - 17th May 20
Will Stocks Lead the Way Lower for Gold Miners? - 15th May 20
Are Small-Cap Stocks (Russell 2k) Headed For A Double Dip? - 15th May 20
Coronavirus Will Wipe Out These Three Industries for Good - 15th May 20
Gold and Silver: As We Go from Deflation to Hyperinflation - 15th May 20

Market Oracle FREE Newsletter


Stock Market Waiting on the Fed at the Top of the Range

Stock-Markets / Stock Markets 2013 Oct 29, 2013 - 01:44 PM GMT

By: PhilStockWorld


Yes, it's a RISING channel!

That's why we are long-term BULLISH but short-term BEARISH. As noted by TraderStewie, this is a movie we've seen before, with the S&P making a power-move to the top of the channel, only to find resistance there that turned out not to be futile.

IFF we break out over that channel (for more than a spike), I will be HAPPY to play a new channel higher but PLEASE – let's just make sure we get there first! In this chart of the Equal Weight Index, each company is treated as 0.2% of the S&P to eliminate the distortions of runaway Momentum Stocks.

On our Big Chart, the S&P is already off to the races, over the 1,760 line (+10%) that marks the top of the range we've been following since early 2009. Overdue for a 10% correction is quite the understatement here!

Of course, it's very hard to quantify where we should be as the Dollar has been diving – all the way from 84.96 in July to 79.06 last week. That's a 5.8% drop in the currency, which is the measuring stick we use to put a PRICE (not a value) on the market. In early July, the S&P was at 1,600 and, wouldn't you know it, 1,760 is EXACTLY 10% over that line (the Must Hold line on our Big Chart).

That's what makes the Fed so important, their stance on QE (announcement tomorrow at 2pm) will determine whether or not the Dollar is bottoming here and, if they are not even LOOSER than they have been, we are likley to see the Dollar move back over 80, most likely to 81, which is a 2.5% move up in the Dollar and, since there is roughly a 2:1 relationship between the Dollar and the indices, we're talking 5% pullbacks but then those pullbacks are likely to be exaggerated as oil and other commodities begin to break down against a stronger Dollar.

As it stands, these are the last few POMO days of the month and the Fed has already blown through over $50Bn in October (out of $45Bn they are supposed to spend on Treasury Purchases!) and has nothing left to contribute in the last few days other than a couple of Billion they found in the couch cushions. We don't get the new schedule until 3pm on Thursday, but yesterday's $5Bn injection was essentially it for the week.

So we're going to be liking both the S&P's 1,760 line (/ES) and the Russell's 1,120 line (/TF) for shorting spots in the Futures. Very simply, we play those lines bearish with tight stops over the line, hoping to catch a good move down. It's going to be tricky today and tomorrow as there will be rumors flying about what's going on in the two-day Fed meeting but the Dollar is rising and, as long as it's over 79.50, we should be getting a bit of market correction.

We got a bit shorter on the Nasdaq into AAPLs earnings last night, in case they disappointed. AAPL did come through with strong numbers and gave a pretty good conference call so we're very happy with our long position on them but still happy we took the money and ran on our bullish QQQ spread in our Short-Term Portfolio.

We're NOT playing oil short, other than our standing SCO spread in the STP, until we see the inventories this week. We hit our $96.50 target last week and below that is $92.50 (after bouncing at $95, of course) and, below that is $87.50 and below that is what oil would be trading at if not for all the shenanigans at the NYMEX – $82.50! That's the VALUE of oil based on supply/demand and cost of extraction in today's economy – the rest is just fluff. Still, there's plenty of fluff and professional fluffers at the NYMEX keep prices as pumped up as they can but we may be approaching a major breakdown here – especially if the Dollar gathers strength.

China is going the oppositie direction, injecting 13Bn Yuan ($2.13Bn) into their money markets this morning in an attempt to keep their one-week repo rates under 5% after 9 consecutive days of gains. Their overnight rate hit 4.5% and that's a deadly combo that prompted emergency measures today and probably did a lot to bounce the Buck. India went the other way, RAISING their key lending rate from 7.5% to 7.75% as they attempt to put a lid on inflation, which is hitting 6.5%, 30% over the RBI's 5% target cap.

This is what happens when Central Banks attempt to control the economy. In fact, as you can see from the inflation chart for India, there was only a brief period in which they had inflation under control – out of control is "normal" for India but the people have reached a breaking point – not good in a Democracy of over 1Bn people! Of course, as you can see from the chart of our own economic idiocy – it's not good in a Nation with 300M people either. Thank goodness we don't have a Democracy or people would be pissed!

It's kind of sad that it doesn't matter what AAPL does or what FB does or what IBM does, etc. this earnings season. All that matters is what the Fed does tomorrow, in Bernanke's last meeting as Chairman. Conventional wisdom is that he will punt and leave policy changes to Yellen's crew next year (IF Rand Paul ever lets her be confirmed. If not, then Yellen (the Vice-Chair becomes acting Chairman by default. In other words, Rand Paul is an idiot!). I think it makes more sense for Bernanke to be the bad guy and call for a teeny, tiny taper – just to see how the market reacts – and then Yellen can "save us" if it doesn't work.

No way to call it though, we'll just have to wait and see.

- Phil

Click here for a free trial to Stock World Weekly.

Philip R. Davis is a founder of Phil's Stock World (, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders. Mr. Davis is a serial entrepreneur, having founded software company Accu-Title, a real estate title insurance software solution, and is also the President of the Delphi Consulting Corp., an M&A consulting firm that helps large and small companies obtain funding and close deals. He was also the founder of Accu-Search, a property data corporation that was sold to DataTrace in 2004 and Personality Plus, a precursor to Phil was a former editor of a UMass/Amherst humor magazine and it shows in his writing -- which is filled with colorful commentary along with very specific ideas on stock option purchases (Phil rarely holds actual stocks). Visit: Phil's Stock World (

© 2013 Copyright  PhilStockWorld - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

PhilStockWorld Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules