Courtesy of Lee Adler of the Wall Street Examiner
What Will Ben Leave Us?
As long as Ben doesn’t drop a turd in the punchbowl, the bias should be sideways to up for at least another week.
There’s no sign of an imminent selloff in the screens or positions of market indicators. If Ben disappoints and the market does sell off Wednesday afternoon, the setup in the market indicators suggests that it will not be sustained for long. On the other hand, many sector charts are on the razor’s edge, so it wouldn’t take much to push them over. A decline that persists through Thursday should do it.
If Bernanke surprises the market with an increase in direct purchases of securities from Primary Dealers, it could set off a scalded dog rally. My take on that would be that he doesn’t and it won’t, simply because they fear, probably correctly, that the commodities would rally first and most, and I suspect that that is something that Ben would like to avoid even more than he’d like stocks to rally.
As often occurs at FOMC days, the market has worked itself to an inflection point. The first move is often a fakeout. I’m looking for a more reliable signal on Thursday.
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Ilene: Lee, so was a turd dropped in the punchbowl?
Lee: The market seems to think so. Operation Twist was so well telegraphed recently that when it was announced, it made a soft plopping sound and the players held their noses and ran for the exits.
Ilene: What are you looking for next/tomorrow?
Lee: The plop heard round the world. Normally the first reaction is the fakeout, but a decline of this magnitude has to do some damage. There’s a support line convergence at SPX 1148. Let’s see. It should bounce from around that area either overnight in the futures, or tomorrow in the cash. A weak bounce could be the kiss of death. A strong rebound would suggest more of these wild gyrations probably into mid-late October.
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Pic credit: The Daily Bail
