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Elliott Wave Trading

Stock Market Rally Keeps Going.....Fed Responsible Again....

Stock-Markets / Stock Markets 2016 Mar 19, 2016 - 05:31 AM GMT

By: Jack_Steiman

Stock-Markets

What is left to say that hasn't been said already. When you look at the charts from this report over the weekend, you will see that they are very self-explanatory. It's been a straight up move leaving the bears feeling sick. You would think that after so much upside action, the market would have hesitated at the S&P 500 2044 gap. Not to be. Right through at 70 RSI on the daily chart. The Dow got to near 81 RSI today on its sixty-minute, short-term chart. Nothing stopping this machine.


All of this began when Mr. Dimon of JPMorgan Chase & Co. (JPM) bought an amazing amount of his own stock. I believe that was planned. I also believe that after the Ms Yellen cut back on the rate cuts she ordered other banker's CEOs to buy back shares. Sure enough, that's what happened late yesterday. If you remember my letter from Wednesday, I spoke about how the banks needed some magic out of the blue, and, sure enough, it came the very next day. There are no accidents, folks. All very carefully constructed.

Yellen knew she needed to do something after she became extremely dovish on rates again, because that's bad news for the financial world. She never is out of bullets, and she knew how to fix the problem. Thursday the problem was more than solved with the buy-back trick. The bears just don't have much of a chance big picture when the world central bankers want the market to head north. Make people happy when they get those 401k quarterly reports. She's a master mind at manipulation through perfect timing. Give her an A+ for doing what's necessary at just the right time. So today was yet another happy day for those frothing bulls who believe nothing can get in their way. Nothing can stop them from all-time highs to come, and they may be right, but there are headaches as always to try and prevent that from occurring. The monthly charts being the biggest culprit, but for now they can dream the dream. And why not? With Yellen covering your back, there's good reason to feel confident about the future, deservedly so or not.

2080 on the S&P 500 is both horizontal resistance and down trend line support. We will watch that area for a possible short-term top. This is only 1.5% away, and the reason it should stop there for at least a while is the overbought conditions that will exist on the daily charts once we do get that high. The Dow RSI would be approaching the upper 70's. And again, that's on the daily chart, and simply unsustainable over time. The S&P 500 would be well over 70. It would likely be approaching the mid 70's, thus, you get the idea. A rest will have to take place soon, and yes bulls, you'll have to deal with a bit of selling. You'll survive. It doesn't have to get as high as 2080 as we're already very overbought on many time frames. But if the market has its head down enough it's possible it could make its way towards 2080 over the next few days. The key to all of this in terms of the bigger picture is how we sell when the overbought RSI conditions cause a sell off. We will need to watch the daily, and short-term, sixty-minute charts for potential negative divergences if the oscillators sell hard. No worries now, but when that selling does kick in with a bit of force, we will gain a lot of insight once things unwind.

Look folks, I get it that things don't make sense fundamentally, but that's not our worry. We know why the market is rocking. It is not interested in the real world. It's interested in stimulus and low rates and nothing else. It keeps the bulls in the game, instead of looking for a home for their money elsewhere away from the market. Don't let emotion allow you to do things that aren't in concert with the action we're seeing. Never say it's wrong. Price is never wrong. It simply is what it is. Play what the market is telling you to play. Don't play what you think it should do.

A day at a time and let's see if we can finally, at some point next week, find some selling to unwind very overbought short term conditions.

Jack

Jack Steiman is author of SwingTradeOnline.com ( www.swingtradeonline.com ). Former columnist for TheStreet.com, Jack is renowned for calling major shifts in the market, including the market bottom in mid-2002 and the market top in October 2007.

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Mr. Steiman's commentaries and index analysis represent his own opinions and should not be relied upon for purposes of effecting securities transactions or other investing strategies, nor should they be construed as an offer or solicitation of an offer to sell or buy any security. You should not interpret Mr. Steiman's opinions as constituting investment advice. Trades mentioned on the site are hypothetical, not actual, positions.


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