Everyone knows the story of the story of the race between the tortoise and the hare, but what if the race had been between the tortoise and another tortoise? Which tortoise would have won the race? The answer is that no-one would know, as no-one would have remained awake until the end of the race. Moving sideways into quantum mechanics for a moment, one could then argue that in the absence of an observer, with the arguable exception of the tortoises, that neither tortoise won the race, if indeed there had been a race at all.
Where am I going with this? I’m just observing that the market tape has been impressively dull lately, and that it will be nice when things speed up a bit, at the end of this seemingly endless topping process. In that regard though, things are at least moving along a little.
Remarkably SPX/ES is still in the same inflection point it was yesterday afternoon. I had expected to see some resolution either up or down on ES overnight but no, so both targets are still in play at either the strong support zone at 2368-72 SPX with rising wedge support, the ES weekly pivot, the 50 hour MA and the daily middle band, or a retest of the rally high at 2390. I’m expecting to see one of those targets hit today and and am leaning bearish, though without any great conviction. SPX 60min chart:
The bull flag channels broke up on both SPX and ES, and the obvious next target is a retest of the ATH on both. As long as wedge support holds, currently at 2365, then my working assumption is that, after an inside day today, an ATH retest is next, with a possible target above at wedge resistance, currently in the 2417 area. First support is at the 50 hour MA, currently at 2370/1. SPX 60min chart:
I always find Fed days a bit strange. The markets seem to hang on the words of an institution that doesn’t actually control interest rates, which are set by the bond markets primarily on the markets for ten and thirty year treasuries. The Fed also doesn’t appear to employ any decent analysts to at least give them an idea of where bond yields might be heading, as shown in the bond bear massacre in 2014 at the end of QE3, where the Fed managed to convince almost everyone that the big rally on bonds that was obviously coming in 2014 would in fact be a big decline. If you’d like to read about that amazing train wreck then I was writing about it in the second half of a post in May 2014 and you can see that here.
Regardless of the ongoing mystery of why anyone pays any attention to the Fed, especially on a day where it seems that they have trailed this modest rate rise so heavily that everyone assumes that the probability of it happening today is close to 100%, and which in any event is just a case of them raising rates from almost zero to a little more than almost zero, I am posting an apposite Monty Python clip in honor of this non-event, though obviously I flatter the Fed with this implied comparison:
The falling channel broke up on SPX yesterday but held channel resistance on ES and turned back down. SPX is now testing the possible reversal level at rising wedge support from the early November low. At minimum the bounce from there so far confirms and strengthens that support trendline, but this often happens just before a break so we’ll see whether the trendline holds the rest of today. If it does then ES channel resistance is now in the 2369.50 area (approx 2372.75 SPX), and the 50 hour MA is now in the 2370.5 SPX area. SPX 60min chart:
I had to redraw it slightly but Friday’s falling channel on SPX has held so far this morning. As this channel is a likely bull flag channel on the bigger picture I’m watching it very carefully. The short term rising support within the channel has broken down and if channel resistance continues to hold then the next obvious target is channel support, currently in the 2349 area. SPX 15min chart:
I’ve been re-reading some bestselling tomes from my economics library and was very struck reading the foreword of one at how the same concerns tend to come up again and again. The writer was talking about how world trade was reaching a point of exhaustion, how foreign competition was hollowing out western economies, and how the cycle of boom and bust has reached a point where it seems to have stabilised into a flatline of permanent and chronic depression, that seems likely to extend indefinitely into the future until drastic economic changes are made. Worrying stuff from Friedrich Engels, who was way ahead of most commentators saying the same thing nowadays as he was writing his foreword to the english translation of Karl Marx’s Das Kapital back in 1886. I’m on the edge of my seat to see how it all turns out when Karl Marx gets around to finishing the sequel, which is racing to publication with George R R Martin’s next book in his Game Of Thrones series.