Don’t Mistake Brains for the Fed’s Artificially Inflated Market
In my previous commentary I said that the scare tactics/lies from both the Democrats and Republicans about the debt ceiling and default etc are just that, but it would be resolved in favor of the market. However, the current resolution is just a stop gap until Feb 2014, and then we get to witness the incompetence again
The SPX has advanced 9 of the last 10 trading days [TD] and is +6.9% so far from the 1646.47 low [10/9/13] to the 1759.33 high. This advance is the 3rd consecutive reversal from a S/T-O/S 100DEMA zone as the Fed controlled “Ponzi Scheme” continues to inflate assets, especially in anticipation of “easy money Yellen” who is expected to be more of a puppet for the Democrats than Bernanke has been
The “herd” mentality is obviously that the market is controlled by the Fed, and until that opinion changes there is no near term top in their view. However, extreme price extended O/B markets with unanimous sentiment that “It is different this time”, are certainly high probability reversal zones, especially from a significant price and time period
The fundamentals are at significant negative divergence to the SPX, which means that the reality risk reward of this market based on that correlation is extremely negative when you exclude the Fed`s intentional artificial manipulation of risk assets.
The SPX made a 1747.79 intraday high on Mon and the 4DMA`s of the Volume Ratio [AVOL/AVOL + DVOL] and Breadth Ratio [ADV/ ADV + Dec] went out S/T/O/B at 70 and 71 as the SPX finished +.01 to 1744.66, followed by a +0.6% gain on Tues to finish at 1754.67, while the internals remained S/T-O/B
The index is -0.7% as I complete this commentary at 12:45PM on Wed and the immediate bias is for some further downside price action following the extended +6.9% advance the past 10 days, most likely followed by more manufactured cycle highs by the Fed.