September 20th – FED WEDNESDAY
The majority of analysts give it almost no chance that the Fed will raise rates on Wednesday, but even his speeches can cause quite a bit of volatility. I’m hoping that a decision not to raise rates will cause the USD to sell down and Gold to break upward, but for now we have to wait and see.
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THE SPX has a reversal candle after the markets dropped and tried to come back. The 10 sma has curled lower and we have a day 10 ‘peak’, so this is L.T. At this point it looks weak, but a Fed Day decision could cause a strong reversal. If this does not reverse higher and get back above the 50sma , then it could sell off for another 20 days or so (3-4 weeks) into an ICL.
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The NASDAQ set up is identical.
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Another look at that first chart shows us a Choppy market. This is basically 21 days, or 3 weeks of sideways directionless movement. THAT is frustrating and hopefully it ends today.
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WTIC – Oil has been strong and it is very hard to ‘short’ a bull market, but I do see a high volume reversal candle on a very overbought chart. Maybe we get a 1/2 cycle dip to the rising 50sma?
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For EXPERIENCED TRADERS only: This may or may not work out well, but SCO is a leveraged ‘short’ Oil ETF. I say that this may not work out all that great because it only rallied $2.50 in August, when Oil dropped into a dcl, but for an experienced trader, it may be worth it.
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GOLD 6:30 a.m. ET – At this point we have Gold running back above the 50 & 200sma after a 1/2 cycle low, and Gold dropped on Tuesday. So far this morning that dip has reversed higher to try to regain the 50sma.
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SILVER 6:30 a.m. ET – Silver dropped to the 10sma and is holding up there as a support area. I would expect higher price after the Fed mtg & speech, but choppy volatility may also come as the Fed speaks, before we move higher.
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GDX lost the 50sma on Tuesday, but when I look at Gold and Silver this morning it also looks as though this will move higher with Gold and Silver. GDX was rejected at the 50sma and is crawling along it now, but let me remove the moving averages and take a different look…
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GDX is crawling sideways with higher lows and forming a bullish looking wedge at this point. It does have room to drop, so I wondered if we may see a Fed Drop as drawn on this chart, and then a move higher? We’ll see. This may just break out and run after the Fed Mtg this week.
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By now we all know how volatile Fed Days can be, right? I usually show the intraday movement in charts that I collect and it is anything but predictable. This was a Gold Fed Day move, so notice the volatility:
1. A move higher into noon looked great, but then it dipped to break even into the FED decision.
2. The rate decision caused that large red crash down candle labelled ‘Fed Sell off’.
3. The speech caused a very strong rally to new day highs, but…
4. That rally sold off into the close and visited the Fed crash low overnight.
5. On Thursday Gold rallied at 4 am and continued higher. NOT AN EASY RIDE.
There have been times when we get an initial slam down and then a rally into the close that continued into Thursday too, so we just don’t know what we will get. As I said in the beginning of the report, It looks almost certain that the Fed announces no rate hike. With that and the current set up, I would expect the USD to finally dip lower and Gold and Silver do look set up to run higher out of that half cycle low. It will still be volatile though. As for the General Markets, that set up is rather 50/50 right now. It could go either way, with an ICL ahead or an ICL behind us. We just have to expect our normal fed day volatility and it may be best to just allow things to shakeout and pick a direction. Usually by 3 p.m. as the Fed takes questions, things settle down a bit and find a direction to move in. It is often best to sit on your hands, watch the action, and wait until the final hour or Thursday for the real move to present itself.
Enjoy your Wednesday trading.
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