Monday, September 17, 2012

Two Words: FED Manipulation

Last week we saw the FED promise to continue to manipulate the market until 2015.  $40 billion dollars per month.  History has proven that market manipulation has only ended in disaster.  I don't think disaster is around the corner for now, but I do think a market correction is long overdue.  Both charts below are indicating that correction is likely to come soon.  It would have come sooner without FED manipulation.  The long term sentiment, indicated by the green signal line in Chart 1 below, is about to cross below zero usually indicating the end of the sell period.  However, the slope of the intermediate signal line (blue) has turned positive.  This could extend the selling period beyond the long term sentiment going below zero (as it did in June 2011).  It all depends on how safe you want to be.

Chart 1: 09/17/2012 S&P 500 Sentiment Signal
The weekly S&P 500 expected trading range for the week of 9/17/2012 is +/- 1.95% or between 1437 and 1494. Futhermore, the expected trading range has dropped below the average trading range.  A move below the average (since 1952) has, in recent history, indicated a good period to sell (see Chart 2 below).  Could be indicating reduced volatility due to upper resistance.

Chart 2: S&P 500 Weekly Expected Trading Range 9/17/2012.


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