Fed antics cause wide swings in stock indexes

spy1212.pngI was going to post charts of gold and the dollar today, but the action was in the stock indexes. The fed was apparently confused about the big loss in the stock market yesterday, so they came out this morning, prior to the open, with some new news about addressing liquidity. Couldn’t this announcement been part of the remarks yesterday? Of course not, as they didn’t know the market was going to drop like it did. The initial reaction was a push up in the Dow of about 272 points. Then the market drifted back down, blamed on the failure of the financial stocks to take notice of this new liquidity helping scheme, and the market was then down around 111 points, to close still up about 41. This is really crazy action. Daily indicators are really useless with intra-day swings like this. I have a five minute chart to the right that shows the previous two days of price action in the day session of the etf of the S&P 500. Isn’t it nice to have a fed that wants to stop any downside from occurring in the markets? What’s wrong with the downside? The markets go up and down. Same with real estate. It was obvious a bust was going to happen in places like Florida. Why should the fed take any action when what caused the problem was greed on the part of buyers and lenders. I know it sounds cold to say that when some people might lose their homes, but that happens when people buy beyond their means and don’t read the fine print. Nobody is there to bail me out when I make stupid trades. I used to have a dog that would lick my face when I was upset. But nobody replenished my trading account when I traded the wrong way, which was usually when I was overcome by greed when trading in a bubble. And real estate was one of the biggest bubbles ever. Books will be written about it. The fed should stop trying to manipulate the markets. Down markets are good. They cleanse and build bases for new advances, as cold as that sounds.
And now for a little reality. The above chart is the Nasdaq Composite with its advance decline line under the prices. I squeezed the bars together to get a lot of history in, going back about a year and a half. You can clearly see the diverging pattern of the pushes in new highs in the prices, against a falling number of issues advances verses declining. Nobody ever seems to care about these divergences when they are occurring. After the fact charts like this get put into technical analysis textbooks. But of all the respected analysts out there, this chart seems to be overlooked or ignored. The S&P shows a similar chart, as it did all through 1999 into the first part of 2000. This time is not different. This chart is the main reason I can’t wait to put the bear back in the box.
qqqq12121.pngHere’s a little closer view of the Nasdaq 100/QQQQ, which tracks very closely to the composite chart in the previous graph, and the SPY in the lower graph. The pink and blue horizontal lines are drawn at the same pivot as I’ve been showing for the last several posts. The SPY closed right on the support line today, after falling below it yesterday. And the QQQQ opened right on it and couldn’t advance beyond it, so seems to be acting as resistance.
I feel I have the perfect graphic in the upper left corner. The trends are holding up by a thread, so the eight second bull remains. A full bull would appear if overhead resistance can be overcome. I think it will take more than fed antics to get the bull moving. It feels like the market’s natural inclination is to head lower. It is very difficult to call with the fed’s every word being watched and interpreted so closely.

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