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Bring on The Fed

6/17/2014 5:44:51 AM

Good morning Traders,

As the Fed starts yet another 2 day meeting that will conclude with an announcement on Wednesday, we have a market that's vulnerable, but hanging in there.

As we've shown, there are short, intermediate and longer term influences on the market. In the short term, the internals have pushed lower and built the potential for markets to push higher for 1-3 days.

But the longer term looks more cautious. Let's go through some charts:

Equity Put/Call Ratio Chart

On the below chart, the zero level is a critical divide between bull and bear markets. The trend towards lower highs on this indicator suggests leadership is waning...

NASDAQ New Highs minus New Lows Chart

On the program buying/selling front, this indicator shows the buy and sell pressure. It's level makes it vulnerable to selling, but it's not at an extreme.

NASDAQ Tick Lows Chart

Another way to look at new highs and new lows shows that the market is potentially peaking here.

New Hi/Low Indicator Chart

Here's a longer term indicator 13-21 trading days on the overall rsi between the spy and the QQQ. Generally speaking during a sell off, you'd want to short the weaker one. We trade only the Qs to avoid having to add more variables into the system. More variables = more potential for error.

QQQ Relative Strength versus SPY Spread Chart

The bigger picture shows that we're close to a top, even though we could see another push higher. Generally speaking, you want to put money to work when this indicator is at a bottom and protect your money when this indicator is at a top. Protection allows you to participate in upside in the event the market goes into a liquidity rally.

Daily SPY Trader Chart

That's it for this morning. We're entering the summer trade season a little early as volume started to dry up on Monday. It's only going to get worse, but it means that the market could hang around absent a catalyst that causes sell programs to kick in and the market to generate some efficiency to the downside.

Regards,

 

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