A Market Timing Report based on the 10-28-2015 Close, published Wednesday Oct. 28th, 2015
10-30-2015 UPDATE: Wedge Must Resolve to the UPSIDE! If the wedge resolves to the downside we’ll easily fall back to 2044 or even back to the 2020.86 high of 9-17-2015. Classically the resolution can be all the way back to the base of the wedge, which means a full retest. I don’t see that in the near term. My view is that we can make it back to the prior all time high. If we get there quickly or even break out above there too quickly, we could see a larger correction as payback. It’s far healthier for the market to ease back, move up etc. than to rush back to the highs or beyond. Stay with me on Twitter/StocksTwits and we’ll navigate this together! Follow Me on Twitter®. Follow Me on StockTwits®).
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10-28-2015 UPDATE AFTER POST FED DECISION RALLY:
We’re headed to 2126 (the down trend line) up to 2134.71, the all time high. That is the next resistance for the market and I believe we’ll get there before this rally corrects. Take a look at the chart (SPX, SPY):
Now here are the changes in the Fed FOMC Statement from September to October. (Thanks go to MSFT for the comparison study shown below):
THIS was the big news today…that drove the bank rally. They are now more biased toward raising rates in December.
There were no changes after that…(see my further comments below). Jeffrey Lacker dissented again, wanting to raise rates by 0.25%.
It is very clear that the change from “maintain this target range” [target range has been 0.0%-0.25%] to “raise the target range at its next meeting” implies their INCREASING bias toward raising interest rates in December. The futures markets showed a 47% likelihood of a rate hike in December, so numerous market participants are NOT in agreement with the Fed’s current economic viewpoint and see it as coming down in the near term. Later the futures market was predicting odds of a Dec. hike at 44%, just slightly lower but still well above the 31% or so registered last week.
Remember that the Fed says repeatedly that it is “Data Dependent,” so they may well change their mind as 50% of market participants now believe they will.
The Fed also removed the language that stressed a higher than normal concern about events outside the U.S. They are restricting their focus on the U.S. data. That’s what they are indicating.
GDP is out tomorrow (1st look; there are 3 different reports of GDP each quarter). If it is consensus of about 1.7% per @BloombergNews, the market should be fine. If it is far too weak, bad may no longer be “good” as the market sees it and the SP500 Index (SPY,SPX) will likely sell off.
ANSWER (10-30-2015 Update and see Twitter/StockTwits): GDP was down big to 1.5% vs. 1.7% expected per Bloomberg.com. Still, it is enough to allow the market to move higher on a Q4 recovery theory.
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FULL FED FOMC Statement is: HERE
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