The Yinzer Analyst is off celebrating his brother’s nuptials this weekend, so the post is going to be short and sweet tonight. Like everyone I was impressed by the recovery that market managed to stage late last week, especially in the small and mid cap segments. Am I completely sold that it’s time to buy and position yourself for another move back above 2,000? Ehhhhhhhh, nope.
First there’s what I can see:
- The S&P 500 had gotten very oversold in the short and intermediate term periods – with momentum scores back to levels not seen since the fall of 2011. It wouldn’t take more than a few off hand comments from a FED governor to spark a small rally.
- We’re back at levels where there’s prior support for the S&P. Here’s a chart we’ve used before showing the S&P 500 finding support at a prior resistance level.
Beyond what we can see is what we can infer, and for what it’s worth, I have a hard time believing the FED will be so quick to abandon their tapering plans for QE3. Despite what Bullard threw out of the cuff, there’s been strong pressure from within and without for the FED to end QE3 and begin returning the markets to a more “normal” footing which includes scrapping forward guidance but doesn’t necessarily include raising rates or unwinding the FED balance sheet. Both Bernanke and Yellen have talked at length about how QE programs have skewed the market’s perceptions and pricing of risk; giving in to another “taper” tantrum will just add more fuel to that fire.
And going back to the charts; we’ve had decent bounce of support – but the S&P 500 still has to challenge it’s 200 day moving average and needs to do it on better volume than we saw Friday. Until then, the downtrend pattern remains in place for the near-term so keep your eyes on your longs and don’t let them run too far one way or the other.