Market Report 3/14/16

The S&P 500 is up 212 points or +11.7% from the February 11th low. It’s been an incredible bounce off the lows and is holding true to the August-October 2015 analog I’ve been pointing out for weeks.

And once again, this past Friday we closed at an extremely significant juncture – right smack at a major confluence.

1) the 200-day moving average
2) the 61.8% Fib retracement from the all-time high to the Feb low
3) the 2020 level from Fed day back in September 2015
4) the lower downward-sloping trendline

Here’s a look at the SPX daily chart and you can see how it essentially closed right at an inflection point.

SPX_D_3122016

With the Fed announcement on Wednesday, the first couple days of the week might be boring – or they might be wild. But I’m certain the price will go wild immediately following the decision. The algos will make sure of that. Just look at the price action the day of the ECB meeting last week.

The market is pricing in a zero chance of a Fed rate hike this week from what I can gather. But interestingly enough, the “data” that the “data dependent” Fed has said it’s using argues for a rate hike. Since it would be a shock to the market I doubt they will raise. If they do – watch out.

Binary event aside, it’s all about how the market interprets and reacts to what’s said. And Dr. Yellen will be speaking so be sure to make some popcorn. With all this going on it’s impossible to know where the SPX lands at the close next Friday, but that will a lot more meaningful then trying to predict how this week transpires.

As I pointed out on the chart above, the SPX has had a massive run-up into an area of resistance. Oil is up +48% over the same 21 trading day period and there are a couple things that could happen.

If oil is destined to pull back like many say, I can’t see the market continuing it’s current run – at least at this trajectory. Perhaps oil pushes a bit higher and takes the market with it. But you know me – I tend to get cautious and skeptical after a run-up like we’ve just seen.

I would not be surprised if Fed day marked a “reversal day” in this current run. I tend to be a bit contrarian as you remember from this chart when everyone was calling for the bottom to drop out and was overly bearish. Seriously, click that link and look at the chart I posted at SPX 1865 and think back to what most others were saying at the time. The doom and gloom was palpable near those lows and almost no one expected it to carry as far as it did to get where it is now.

I’ve been pointing out the “analog” of the current pattern that is strikingly similar to the Aug-Oct 2015 period for some time now. If that analog holds there is still more upside, but we are in the 4th quarter of the game.

All that aside we are definitely in a strange environment and anything can happen. and the craziest thing is that I’m seeing a lot of decent chart setups. And of all things – in the Financial sector.

I posted 3 new charts in the Chart Feed and quite frankly I could have posted a dozen financial stocks / banks because many have very similar patterns. Nice bottoming patterns with bull flags and last week’s low that can be used for a stop.

But there are a lot of forces at work and I’m concerned this all might be a trap. Trust me, if oil is headed back down (which we don’t know) buying now after this current monster rally will turn out to be a trap. If the Fed language isn’t just right, buying ahead of it might also be a trap.

I suppose the possibility exists for a sort of melt-up and blow-off rally, perhaps to the area of the upper downward-sloping trendline I drew on the SPX chart above. Like I said, the market is at an inflection point and nothing would surprise me. Since I can’t predict what will happen, I’m not even going to try. It amazes me how many people do. All I know is that the price action this week and especially the close at the end of the week will provide the best look at what to expect going forward.

We have one open swing trade in DATA and it’s looking pretty good. I moved the stop up to breakeven at the entry and it won’t take much to get it to the target if the market cooperates Monday or Tuesday.

Don’t be surprised if I go for another trade this week ahead of the Fed, just because it might actually be worth the risk. Maybe one of the ones I posted in the Chart Feed or something else that looks good. Like I said, there are honestly a LOT of decent looking setups here. Of course the way the market is so schizophrenic these days we could gap up or down big Monday and that could change everything. If you’ve been with me on the shows you know that I like to avoid making decisions the market open and generally the first couple hours of trading. Personally I like to watch and gauge the price action for a bit and focus on how the stocks in my ‘main watchlist’ are acting.

Everything is so volatile these days. Just look at the day to day movement in oil and the gold stocks and mining and energy etc. I can’t help but be a bit nervous that “they” could pull the rug out from under this thing at any time. A week ago I pointed out how the market was very overbought and last week it worked some of that off. The current inertia and trend could still carry it higher but like I said a long time ago – when the “buy everything mentality” returns, it’s time to start looking for the exits. Maybe we’re almost there, maybe it happens at 2050 in the area of the top green circle I drew on the chart at the top of this page.

Here’s where everything stands year to date.

YTD_3122016

Who expected gold to be leading the pack at this juncture? Very few people, I’m certain. I have a feeling everything is going to go nuts (gold, oil etc) around the time of the Fed announcement and subsequent Q&A so we’ll just have to see where everything settles out when all’s said and done.

As my friend Dave Landry once said, “when all was said and done, a lot more was said than done”. That one was so good I remembered it.

Please join me this week for the live shows and keep your eye out for the next email trade alert. Just because this promises to be a wild week doesn’t mean I want to avoid the action.

I’ll keep you posted on everything day by day in the Alerts Section at the top of the members home page. Log in and check it each evening.

Until next week, I’ll see you on the inside!