Fed Testimony Aids Selloff

For those who think the Federal Reserve has any idea what it's doing, or think the central bank of disaster has credibility among the economy and markets, yesterday's price action was a meal of your own words.

In a down market, like this one, up moves are opportunities to sell and yesterday's Fed blabber-mouthing by Janet Yellen slammed price into a level of resistance where sell orders filled faster than Hillary Clinton can delete classified emails.

S&P Futures Chart 60M

Weekly Wrap up 1 - 5 Feb 2016

My technical thesis last week would be green was overcast by deleveraging in every sector associated with the 2013 breakout. Although markets are in an overall downtrend, there was, at the beginning of the week, enough technical evidence to support an up move to SPX 2000 and DJI 17,000.

Remember we are not trading the real economy. If we were there wouldn't be anything to trade. In these markets we are trading the fictitious economy created by Fed inflationary monetary policy and "strong employment numbers" like Obama touted on Friday. Technical analysis is not about trading what you hear or what you know, only what you see. From last Sunday's charts price looked like it had more up than downside potential going into the week.

However, despite some small upside trades on SPX and DJI correlated products my short term "rights" were overshadowed by longer term "wrongs".

From the SPX daily chart (above) we can see how price started Monday, 1 Feb, down then rallied but failed to close above the prior Friday's high suggesting trouble for my "target 2000" premise. The upside, to this otherwise down week, is the floor is still holding at 1875.

Looking at the DOW we can see how it, without the weight of under-performing financials, fared better than the S&P 500 yet, like the SPX, did not manage to place new highs above the previous week's close.

If the NASDAQ is the harbinger of death for bull markets (above) then price aggressively converging on the 4300 level might mean something. This index and the IWM are the worst looking of the majors, Gold and the 30 year bond (price) being mirror opposites.  

The problem for last week's "up" thesis was the real economy, the one were not supposed to hear about, reared it monstrous head exposing asset classes for the paper tiger house of cards they really are.  

Considering the weakness, overall downtrend, and likely impending destruction of price appreciation, I will start next week open to upside trades while  expecting floors on the aforementioned indexes to fail. 

Question and comment below.

Happy trading.