Yesterday
Back in the day there was a wonderful TV series featuring Jackie Gleason, playing the part of Ralph Cramden, a feckless New York City bus driver, and his hard-worn, long-enduring wife Alice, played by Audrey Meadows. Every time Alice reminded Ralph of some unwelcome but obvious fact, he would shake his fist at her and threaten: “To the moon, Alice, you’re goin’ to the moon.”
Poor old Janet Yellen must be feeling a bit like Alice these days. Every time she points out something obvious – the market is a little precarious, economic data has not been strong, unemployment persists, despite job gains – traders and the algos interpret that as a signal the fed has changed its mind about rate increases and sends the market straight to the moon.
It happened again yesterday. The June S&P 500 min-futures contract (ESM5) was working its way lower in generally disinterested trading. It dropped eight points off the open almost absent-mindedly, while traders waited for the FOMC announcement at 2:00 p.m. EDT.
When the FOMC minutes were released, the market ramped up 45 points in a frenzy of what can only be described as panic buying, based on the belief that the Fed will raise rates – if it does – slower and lower than expected.
The futures reached 2099.75 – just one tick below the previous support at 2100 – before falling back slightly to close at 2092.50. The market has now recovered about 80% of the loss since the Feb. 25 high, and recouped 67 points since last Friday’s low (Mar. 13).
For this week at least, nothing matters in this market except the Fed, and what the market thinks the Fed means by statements like this from Janet Yellen:
“In other words, just because we removed the word ‘patient’ from the (FOMC) statement doesn’t mean we’re going to be impatient.”
We don’t know what that means either. But it was worth $2,250 per contract to a few people today.
Today
At this point, the market looks like the python that swallowed the pig; engorged, and likely to lie around in the sun digesting its prey.
We still have option expiration to provide a little excitement, but it’s hard to believe we’ll see anything like yesterday’s frantic action.
The bulls have regained control of the broken, short-term support lines which indicates that the short-term low may have been posted. Now the 2075-65 zone needs to hold ES up to help the price reach new highs.
There is a resistance line at 2104 just ahead for the ES. As soon as the price passes that resistance line, the futures can move back up to 2115-20 or higher up to new highs around 2135-45, the upside targets we mentioned in our weekly trading plan.
If the price remains under 2104, the ES will fight to hold up 2088.75 for Friday’s close, which likely means a sideways consolidation today and tomorrow.
- Major support levels: 2035.50-33.50, 2028-29, 2021-23.50
- Major resistance levels: 2085-88.75, 2094.25-96.50
ESM5 Intraday Chart, Mar. 18, 2014
#####
Naturus.com publishes a free weekly analysis of US equity indices. To get on the mailing list to receive it, please click here.
