I think we're near a rally, too. Not sure if it comes tomorrow, but it may. Typically, a FOMC day means:
-action the first hour, then meandering till the FOMC announces.
--action after the announcement, which often spikes one way and reverses.
What can FOMC do to spark a rally or plunge? A rate cut is a no-confidence vote in the mkt... this would cause a plunge. Doing nothing sparks nothing: we've priced that in. Raising the rate would cause a spike down plus rally, as it indicates the Fed is optimistic looking forward.
IMO, only the latter two are plausible; a rate cut would inspire a panic and retest of the Sept low quickly.
The closing move of DOWdy & NASDy suggests a gap down is due at the open, though we don't want to see 1549 breached (or 9530 on DOWdy) because that leaves the DOWdy with one support before retesting the Sept bottom and the NASDy with nothing left but a direct retest. I think it's too soon for the latter.
Now consider common trading patterns. Over the past 6-7 years, typically, the NASDy's worse case is to close lower 5 days in a row. In the past year, 3 exceptions have occurred. We had 6 off days once. Then 7 off days once.
Then in April, we came very close to 9 consecutive down days... we had 6, then a day that the COMP closed up a mere 39 cents, followed by 2 more downer days.
The closest parallel to what NASDy has done in the past 60 days is Aug-Sept 2001. There's very strong odds, based on trading patterns alone, that tomorrow will be the last down day... it would be the fifth consecutive, and we've yet to follow 6 with 6. So purely by gambler odds, looking for an intraday low tomorrow seems a safe bet.
But gambling is not for some. So consider: the TRIN is pointing to a nice pop soon, by all historical measures. There are other indicators that the indexes are oversold and the VIX VXN SOX suggest we're nearing a turnaround too.
My instincts suggest we'll hit a low between 2:30 and 3:30 tomorrow, with a modest rally late. That low preferably will come before 1549, but must come before 1528 to prevent fear from dominating. Wednesday should pop nicely. Thursday should be flat to mildly down. Friday should be up.
After that, we can do a long slow rise to 1730 or even 1800, where the 200 dma sits. I think we'll peak by 5/30, if not sooner. Around 1730-1750.... so you see, I'm counting on a whole lotta boring horizontal days.
But the real question is what to buy long now? Something oversold or something with relative strength this year? Wednesday is for the oversold. The rest is for the likes of OREX and others with relative strength this year.
Unless the mkt bursts out strong and runs from the beginning tomorrow, I'll prolly play HGMCY and GOLD long early (mebbe JBLU agin too) and something beat-up around 2pm ... mebbe PRGN, CIEN...
Of course, I have no freekin' idea what I'm talking about, because I'm only 5 and my penguins are only stuffed ones. But posting here beats Mr. Rogers reruns and making doodoo in my dipeys, so I try. |
