This Is A Technician’s Dream
Message to Fed: Please
Provide Volatility
I do not need to reiterate this, bit we
desperately need volatility. This slow grind with a slight upward bias is for
the birds. I do not believe I ever recall a time when some many traders were
singing the same tune. Naturally, something needs to give, it is just
impossible to know when and what that may be.
The FOMC meeting on Tuesday may provide us
the catalyst. Let’s review what the Fed is up against:
1. An economy growing at a rapid pace, +/-8%.
Naturally, this rate is unsustainable, but +3% is still strong
2. Election year approaching
The whole deflation argument that the Fed keeps
chirping about is misguided. With the exception of technology, very few things
in my life are going down in price. However, the Fed tells us that inflation is
tame. Right! But if the economy is growing at such a fast clip why the need to
be a dove with interest rates? Is there something the Fed know that we do not?
If the economy is on a sustained growth path, not raising interest rates has the
potential for some ugly scenarios down the road. The insightful and decisive
central bank in Australia has now raised rates twice in the last two months, our
Fed should take note.
I have some thoughts on these questions, but the
answers are irrelevant to us as traders. I highlight this situation because it
goes a long way at explaining the present situation. There are far too many
“what if’s” presently for the market to exhibit a high degree of conviction. If
you sit in front of the screens all day you see it. Can the S&P’s trade any
worse? Why does the market feel labored, yet never pulls-back? If the Fed, for
better or worse can answer some of these questions, the markets should loosen up
a bit.
Until something gives, trading will remain
challenging and sparse. Each day one needs to ask themselves, “Is this a dry
spell, or is there a wholesale shift taking place that I need to adapt to?” I
hate to say it, but my answer is a combination of the two. There will always be
action in stocks, I believe however, that we have entered a phase where there is
better action in other markets. You only need to look at gold and the other
commodities as well as FX to know there is action if you seek it out.
The vast majority of the trading days in the last
month or so have only provided good set-ups on the opening, the afternoons have
been pathetic. That leaves four to four and half hours each day to examine
other products. I continue to find ample opportunities in
FX. As I have said before, this market is a technician’s dream,
they just chart wonderfully. A trade I had been waiting for for over a week now
was finally triggered on Friday. I am now long the
Japanese Yen (JPY) at 107.90. If it can manage a close below 107.55,
it has a good shot of heading towards 105.00.
| Support/Resistance Numbers for S&P and Nasdaq Futures |
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As always, feel free to send me your comments and
questions.