Quantitative Easing the Bull or the horn the market is running on high hopes? The S&P500 emini futures has been in a bullish trend reaching new highs.
The FOMC meeting on Thursday, seems like a lot of hope is betting on the next round of Quantitative Easing. Although the S&P500 emini futures contract has been trading on abysmal volume, it has levitated to new highs. Monday, we barely made it through 1 million contracts.
The Support for this move is again at the previous swing high. We are looking for this break of the resistance at 1440 with a projected move to 1465, then to 1487. Normally we will see a volume increase in the second week of September but with all the pressure we have in Europe there has only been a few days close to 2 million. The problem for most investors trading this market versus the institutional trader is that these periods of low volume can produce volatile break outs which turn into head fakes as investors are buying into a move as it retraces.
If the market stalls at 1452-57 after the Thursday FOMC announcement, then I will watch for a sell off to break through support at 1420, then 1398 with an extreme low of 1340. This is contrary to what is being said in the market place by the pundits for the next round of easing, If the Fed backs off then we might see this scenario.
Keep your powder dry, take executable trades that follow your risk management strategies. Don’t make a bet on the direction, only trade your set ups. This could be a very volatile move in the markets.
Quantitative Easing – The S&P500 emini future, the Dollar index and the Euro are all lined up for a move. But with this move leading up to the Quantitative easing and the bullish price action, could the Quantitative easing be priced in?
There will be one more market session before the announcement and the markets have been moving as if the decision has been made. The target on the S&P500 for extending this range could be up to 1485 – 92 . The initial target on Dollar index on support is close to 79 with and extension to 76. The Euro is approaching a previous congestion zone which would give it a range from 1.3055 to 1.3280 .
If the Dollar index does extend to it’s down side targets, we can expect to see 1800 in gold and maybe an extension to 1910 on volatility. Watch out as the moves could be quite big and fish out a lot of stops on retracements.
Quantitative Easing has been like a drug to the market, addicts lining up for a free economic boost.
The Point of Control for a continuation of this move is 1436.25 in this consolidated range on the ES (emini futures S&P500) We will probably see this bounce around with in a few standard deviations until the Fed announcements.
Trade what you see, and never listen to the Gurus. Only trade what you understand, and what you can afford to loose. Trading is high risk, never test the market with real money, use a simulator until you have proven yourself effective in your trading system and your trading psychology. And remember, you are the only one responsible for your trading. Quantitative Easing does not guarantee direction in the market place.