I just wanted to talk for a moment about conviction bulls and bears today. I'm not one to disparage anyone's religious convictions, but that being said, it is a firm rule that any genuine chartist will consider the price data before forming any conclusions from that data, and those conclusions will always be a matter of relative probabilities, never absolutes. Any chartist who doesn't do that isn't a chartist at all. What they are is something between preachers and public entertainers, without either the long term incentives offered by the first, or the amusing antics of the second. There are a couple of quotes that say this better than I can:
'The fundamental cause of the trouble is that in the modern world the stupid are cocksure while the intelligent are full of doubt' - Bertrand Russell
'The best lack all conviction, while the worst are full of passionate intensity' - WB Yeats
Reasoned analysis can generate opinions, but never faith. Very strong convictions in financial analysis are warning signals that you are reading something written by either a charlatan or a fool. For those suggesting that I am a permabear here, and also those suggesting that I was a permabull a year ago, I offer the following wisdom attributed to Denis Thatcher :-)
'Better keep your mouth shut and be thought a fool, than open it and remove all doubt'
On to the markets where the +3 close yesterday has lined up this week's FOMC stats with the only three other examples going back to 2011 where there was a decent gain on FOMC day followed by a green close of more than a few ticks the next day. As I mentioned yesterday all three previous examples were no more than three days before each of the only three retracements over that period that exceeded 10% from intraday high to low.
I ran this back to the start of 2010 and picked a fourth example that was from the FOMC meeting before the fourth 10%+ retracement this decade, but in that case SPX ran up another fifty points over five weeks weeks to make that high just before the next FOMC meeting. I'd take this signal as strongly bearish and a signal that a significant top is close, but there are no certain outcomes and no family farms should be mortgaged to position short here.
I was asked yesterday what the obvious target would be for a retracement here and the obvious target would be primary channel support on my weekly chart below ...... as long as that channel remains unbroken. That is currently in the area of the 1737 low, which is also a possible larger H&S neckline area. To open up any lower targets the channel would obviously then need to break down, but I wouldn't be assuming that would happen.
The close yesterday was 3 points over the weekly upper bollinger band. That weekly candle fixes today as it is the end of the week, and if we can close at or over 1965 today that would both make the two wedge targets there, and should also deliver a punch close above the weekly band, which would be another decent topping signal.
SPX weekly chart:
On the daily chart I have a possible target above at the daily upper band, which on a strong day today I'd expect to close in the 1970-3 area. SPX daily chart: