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The State of The Trend

There are two main events next week likely to shape the trend of the indices in the upcoming days: FED meeting, March 17-18, and quadruple witching, March 20th. The most recent occurences of these events are marked on the chart below:

S&P500 Daily Chart
Larger Image

During the past year, the pattern leading to quadruple witching has been fairly consistent: sell-off the week before, rally during expiration week. Adding FED meetings to the mix didn't change the outcome.

The expectation for a rally next week is also bolstered by the fact that weak seasonality is coming to an end, and that the broader market, as represented by the Russell 2000, wasn't affected by the sell-off as much as the narrower indices, such as the DJIA, SP500 and NDX. The uncertainty surrounding next week seems to hinge on whether the FED will keep or omit the word "patient" from its statement. Something that was not an issue last year. Therefore, we'll keep an eye on the 2050 level for the SPX as our bullish/bearish fulcrum.

Trend Bars™ continue to do a nice job of defining the trend and filtering out random price noise:

SPDR S&P500 ETF Chart
Chart courtesy of OddsTrader


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