Just to add to confusion regarding what future direction the FOMC may take regarding whether or not to raise interest rates in 2015, we see this tweet last night...

Fed Double-Talk

I would just remind readers that Janet Yellen's comments last night are HER comments and are NOT the official Fed Policy Statement that was released at their last meeting on September 17th. In their Release, they stated that...

"Recent global economic and financial developments may restrain economic activity somewhat and are likely to put further downward pressure on inflation in the near term."  


The following 1-Year Daily comparison chart has the Dow 30 plotted on as the baseline. You can see that the SPX, NDX & RUT have, for the most part, outperformed the Dow this year.

We'll see if market participants are willing to keep buying into riskier assets in the NDX and RUT (since they're currently outpacing the SPX), or whether money will start flowing back into the larger-cap stocks.

My own feeling is that if (big) money starts fleeing the NDX and RUT (risk), we could, finally, see the SPX and Dow (and other world markets) follow...especially, emerging markets, Japan and China. So, I'd watch for any signs of fresh, large-scale dumping of "risk" on this comparison chart.

Will Markets Take On More Risk?

With the VIX currently elevated and sitting just above major support (the zone between 20.00 and 25.00), we could, very well, see some large-scale risk-dumping occur (with continued wild, volatile price swings) before markets settle down (when the VIX falls back below 20.00).


The Highs and Lows of the SPX You can see from the Daily chart of the SPX below that the recent long-tailed hammer off the 200 MA failed to confirm the beginning of a new bull market trend.

The roller-coaster sideways movement of the SPX for 2015 will likely persist until, at least, the September Fed meeting, when markets are anticipating the first rate hike. Until then, we may continue to see failure of (sustainable) breakouts in either direction.

The Highs and Lows of the SPX
If we see a bearish moving average Death Cross form on the World Market Index (as appears imminent soon on the Daily chart below), this would confirm a weakening global economy and would likely drag the U.S. markets down, as well -- possibly, before the September Fed meeting. This is one chart to keep an eye on, as well as China's Shanghai's Index.

The Highs and Lows of the SPX

Source: Strawberry Blonde

Just glancing at this 5-Year Daily chart of the SPX, I'd have to say that 2038 (300 MA) represents major support  as the Bull/Bear line-in-the-sand level...plain and simple.

SPX: Bull/Bear Line-in-the-Sand Level

Lumber and the Homebuilders ETF (XHB) traded, essentially, in the same directions from mid-2010 until October 2014 -- when Lumber suddenly took a nosedive down to major support at 240, while XHB broke out and rallied -- as shown on the following 5-Year Daily comparison chart.

At the moment, it looks as though that support level will be retested, once more. A drop and hold below 240 could very well be the catalyst that breaks XHB's slightly-sloping (tight) uptrend. And, a drop and hold below 220 could see a very quick, sizable plunge in XHB...possibly slicing through 34.00 down to retest major support around 28.00, or lower.

Lumber and Homebuilders ETF...two charts to monitor to see if the current spread between them continues to widen or shift.

Lumber vs. Homebuilders: The Great Disconnect

Source: Strawberry Blonde

Q2 of 2015 closed (Tuesday, June 30th). The following describes candle action, to date, in four timeframes -- namely, Yearly, Quarterly, Monthly, and Weekly timeframes.

Each candle shown on the following chart of the SPX represents One Year.

The first half of this year is depicted by a "doji," as of the close on June 30th -- spelling "indecision" by this equity market. So far, the close is a mere 4.21 points higher than its open on January 2nd...not much of a gain in six surprise, since price has been held back by the 161.8% External Fibonacci Retracement level (taken from the last major swing high in 2007 to the 2009 low), which is a typical major Fibonacci profit-taking level.

SPX Candle Review of the First Half of 2015

Each candle on this next chart of the SPX represents One Quarter of One Year.

Q1 of this year is depicted by a "spinning top" -- spelling "indecision" by this equity market. Q2 of this year is depicted by a "shooting star" with a slightly lower close than Q1 -- spelling a rejection of higher prices and a "bearish tilt" to this market.

SPX Candle Review of the First Half of 2015


Momentum has declined since 2014 on both charts -- confirming the lack of bullish confidence and commitment in this index. Candle action on both charts shows that major profit-taking has occurred in a considerable number of stocks in this index, so far, this year. In order to confirm that bears have taken firm control of this index going into Q4 of this year, we'll need to see a lower close on the Q3 candle (which begins tomorrow) on September 30th.


However, looking at two shorter time frames:

  • because of June's "bearish engulfing" candle, we'll need to see a lower close for the upcoming July candle on the following Monthly chart to signal further medium-term bear strength going into August, and
  • because of last week's "bear harami" candle and a lower price below that close, so far, this week, we'll need to see a lower close by the end of this week on the following Weekly chart to confirm further short-term bear strength going into next week.

So, I'd watch for lower lows on this week's candle with a lower close on Friday, and, then, a lower low on July's candle with a lower close on July 31st -- also, a drop and hold of the Momentum indicator below the zero level on both charts (it has already dropped below zero on the Weekly timeframe) -- to warn of bearish control of this index going into August.


SPX Candle Review of the First Half of 2015


SPX Candle Review of the First Half of 2015 ...

As Canadians, we are "privileged" to live in a country plagued by -40° C temperatures, ice storms, hurricanes, and tons of snow in the winter and +30° C temperatures, flooding, tornadoes, mosquitoes, and black flies in the spring and summer...and, we live in constant threat of earthquakes along the West Coast.

Now, we are "privileged" to learn that inflation is, indeed, alive and well in Canada. This report released today from Statistics Canada shows that the Consumer Price Index (CPI) rose 2.3% in the 12 months to May, following a 2.0% increase in April...their breakdown is as follows.

Inflation: Alive and Well in Canada...Rate Hike Ahead?


Inflation: Alive and Well in Canada...Rate Hike Ahead?


Inflation: Alive and Well in Canada...Rate Hike Ahead?


Inflation: Alive and Well in Canada...Rate Hike Ahead?


Inflation: Alive and Well in Canada...Rate Hike Ahead?

In response, the Canadian Dollar is trading higher again today (Friday), as shown on the following 10-Year Weekly chart of USD:CAD. There is currently minor Fibonacci support around 1.08, while the 1.10 level has been quite "noisy" this year.
Any plunge and hold below the 1.065 major support level may pose some cause for concern on the part of the Bank of Canada, particularly if inflation continues to rise or remain elevated...if it does, we'll see whether it creeps across the border into the U.S.
So, rate hike ahead for Canada?...or, even the U.S.?

Inflation: Alive and Well in Canada...Rate Hike Ahead? ...


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