Beta Be Gone...Fed On Deck...
No movement. Market tries to move forward, or backward, yet can't gain any traction as traders are mostly gone for the holiday weekend coming up, and, of course, they're waiting for the big announcement out of Mr. Bernanke coming up this Friday morning. We tried a few times today to actually get moving upward, but as the day wore on the bulls were taken over by the bears, and thus, a flat day overall with just fractional gains across the board.
Since hitting the top of the wedge on the S&P 500 at 1427, the market has struggled. It's unusual to take out massive resistance, such as the top of a long-term wedge on the very first try. So it’s no real shocker that we've pulled back off that move. Bigger picture you want to see how the pullback occurs. Whether the bulls can keep that 1430 level in sight, or whether the bears are capable of making a stronger move down putting 1430 out of the rear view mirror. So far, the bulls have kept things in order as we've sold down, but there's that headache upon us coming Friday with the Fed.
Most of the time, the news is sold, especially if the market doesn't get exactly what it had hoped to get. The Fed is a big candy store of protection for the kids on Wall Street. You know how kids can be. If they don't get exactly what they want, sometimes they brood, and thus, the market may sell down Friday. It's going to be a very interesting day for both sides as the choppy action is likely to continue even after the speech is completed and the market knows exactly where he stands.
The VIX cleared 17.00 today or its 50-day exponential moving average at 16.91 to be exact. That's not great news for the bulls as this level was strong resistance and had kept the bears at bay for quite some time. If the bulls don't act quickly, it'll break away from those 50's and shoot for higher levels, which would indicate a stronger move down in the markets. The clearance of the 50's today was small in nature.
Not forceful, yet, but it is through, thus, the bulls need to come in now and take it back down. If it does race higher, we'll get that selling that will allow for the oscillators to reset. There’s nothing wrong with that at all. It's not bearish to reset, even if it feels that way due to a selling episode of 2-4%. I understand that wouldn't feel good, but it is what it is. It's not bearish. The key is to be sure you're not loaded up in your port. Taking on a lot of new plays here is extremely risky. Be smart and move in slowly. Or stay in cash.
Any action between 1380 and 1430 on the S&P 500 is pure noise and nothing else. We could ultimately breach below 1380 by 1-2%. Nothing terrible if that happens as long as the oscillators do not confirm a price breakdown. We watch and learn as things move along. For now, we await Friday's report from the Fed and the reaction from the market. Once that's out of the way things will be far more clear to all of us.