August 22, 2017

Post Fed-Reversal? Where do we go from here?

As expected the market finally broke out of the tight range that it had been trading in during the last couple of days. However, the typical whipsaw effect that we see following a policy statement did not occur today as the market advanced steadily into the close.

In the past when the S&P has moved 0.5% or more coupled with a similar move in the bond market, specifically the 10-year, the market struggled to move higher and typically lost ground.

Furthermore, given that the indices are now near-overbought to overbought and back near strong overhead resistance my guess is that the post-fed reversal should live up to its historical billing.

The major indices have been trading sideways within a fairly narrow range over the past few months so I expect to see a break out of that range in February. Overall, February is one of the weaker performing months and the weakest month of the historically strong November-April time frame.

Oversold/Overbought levels for January 31, 2007

  • SPY – 68.4 (neutral)
  • DIA – 70.9 (overbought)
  • IWM – 70.0 (overbought)
  • QQQQ – 57.2 (neutral)
  • OIH -69.1 (neutral)
  • GLD – 76.9 (overbought)

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