A week ago today, Jerome Powell took candy from the hands of babes up and down Wall Street. It was after all, his candy to begin with. Words he uttered, meant to comfort traders and calm the markets "We're prepared to do whatever it takes", were quickly snatched out of context and the countdown to an interest rate cut was on.
Not surpising as the market and its participants are forever looking for any fuel to throw on the fire just to get the next fix. As last weeks Fed announcement approached, the chant on the street went from the quarter point cut that somehow baked itself into the cake, to an even more brash demand of .50 cut.
On last Tuesday's broadcast, one day ahead of the Fed, we cautioned listeners to prepare themselves for the remote possibility that the Fed would stand pat and not lower rates at this time. "Hissy Fit" was the technical term used to forecast the behavior of traders if they did not get what was owed to them. In the minds and hearts of traders around the globe, Jerome's 'words of comfort' had effectively been transfigured into a promissary note signed in Fed blood.
The clock ticked its way to 2pm EDT and by 2:01 the world stood speechless. Not a 1/2, not even the pre-baked 1/4 point that was certainly in the bag (right?), suddenly wasn't. The only thing I found notable about the event was the manner in which the market shook it off like a laborador after a swim in the creek. Here I had anticipated blood in the streets (hissy fit), and yet there I stood waist deep in calm waters.
The 2PM 30 min candle opened at 2922.75 and dropped quickly to the WTZ at 2915 highlighted on the chart below. Only a 7 point drop after a Fed-sized failure to deliver? I was surprised, confused, and just a tad suspicious. By 7:30pm the same day, price had not only, 'not imploded', it rallied all the way to the WTZ (Weekly Trading Zone) overhead at 2943. From the rate induced drop to the Wed. evening swing high, it was a 28 point gift to those who remained on the long side of the street.
No one was more surpised than I today when Bob Pisani on CNBC (my audio wallpaper) remarked "Here's the Hissy Fit". You made me smile Bob, along with all CFRN Traders. It was simply a matter of time and we welcomed it with open arms. Be assured, the sky is not falling. It's NOT different this time, and as always, the deeper the retracement, the greater overall affect on the health of a market that desperately needs some rest. Not a nap, but sound slumber. The kind where little cartoon ZZzz's drift skyward.
Tomorrow I will cover the big picture numbers and where the market may begin the next leg of this incredible Bull Move birthed Dec. 26, 2018. Tonight, here are the numbers to carry you right up until the Wall Street Open.
Consider being short the S&P 500 Emini ESU19 at 2922.
Initial Target 2920
2nd Target 2910
Final Target 2900
Should European traders on the buy-side manage to hold off any further drop overnight, we will update the numbers tomorrow morning before the Wall Street open, or just after the 10AM Economic Reports.
UPDATE 8:50AM EDT - An after the London Open Buyers asserted themselves and held off further decline pushing the ESU19 higher by almost 20 points. If the current pullback does not hold, last night's Globex numbers are still valid. For now the potential for the overnight move to be a head-fake looks real.
We will update again shortly.
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