The SPX (S&P 500 Index) as well as every index, has been on a face-ripping, short-covering rally since the Fed removed the key word “patience” from their vocabulary last Wednesday.
It was the only thing the financial media could talk about – will the Fed remove the word “patience” or not? And all of that talk was nothing but hype. The SPX is following our turn dates, and it moved lower when it was expected on March 3rd, and then it turned higher when it was expected on March 18th. It didn’t make a difference what the Fed said; the algorithms were going to buy the announcement, period!
The primary place retail investors get their information are these financial news stations. The retail trader was brainwashed into thinking if the Fed removes “patience,” the markets were going to go down. Many were shorting when they should have been buying, and the rest were just watching from the sidelines. Now the shorts are scrambling to cover and the sidelined bulls are being forced to chase-right as we move into the hangover stage.
What To Expect
The bulls may take another day or so to try and lure more buyers into this rally. The smart money will be selling, as the easy money was already made. Depending on how bad the “rally hangover” is we are going to see some type of backing and filling. If history is our guide, it will be sharp and scary to the downside.
BUY THE DIP – THE HIGHS AREN’T IN YET!
Once that low is made, we are expecting another push to new highs once again. That is about as far out as we want to look for now. Expecting some selling and then buying is the best road map we have right now.
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