Rants about the Fed are a huge waste of energy, but something interesting happened yesterday that I'm taking note of. Vice chairman Janet Yellen said she favors eliminating a calendar-style commitment to easing, and that 2% inflation shouldn't be considered a ceiling.
Yellen has long been known as a dove, but these statements were incredible. QE Forever. And inflation? Bring It On.
But the thing that caught my attention was that the market sold off.
I've long felt that the day would come when the Fed would announce more stimulus and the market would tank. If Yellen's remarks were a trial balloon, it just popped.
Victor Neiderhoffer would say the market's form is changing. I remain confident that the highs are not in, but the more I see tells me to sell new highs IF they occur. The reaction to Yellen's remarks was the clincher.
The market has also proved, in wave terms, that the rally from the June lows was not impulsive. This does not preclude another high, but it does raise my conviction, once again, that the market is nearing a significant top.
I had thought that top was put in last April. I was wrong. But the market is now below the 1380 level that I had targeted as the sell level in July. I could be equally wrong now that the market will recover to new highs; I would be happy to be so wrong.
But let's be fair: since 2009, the only time there's been heavy volume in the market has been on heavy declines. Suddenly, there's no volume as the market is declining.
I'm still looking for a bounce to the 1400 area. I must admit, it's not looking good. I still think there are lower lows to come. This being an option expiration week, both could happen. I'd be happy about that, too.
A close below 1370 would expose lower levels such as 1360, 1350, 1346, 1336, 1319, 1266.74, and 1222.
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