Last Monday, may 21st SPX closed at 1316, on May 25th it closed at 1318. It is as if the last few days did not exist at all. All intraday highs and lows for nothing. For two consecutive days I have written that although I expect a “Memorial day rally”, I am not sure how far it will go and it is just a counter trend rally if it happens. For three days in a row, they have goosed the market at the close, to make it close in green by a whisker. And McClellan Oscillator is doing something funny. It is slowly creeping out of the oversold position and reaching the Zero level. All for 20 SPX points? But then why bother about one week, SPX has not gone anywhere for the years as a whole. If you think this week was a waste, then last one year was waste as well. Only the brokers made money out of us. And of course TBTF banks.
Coming back to the market, it remains oversold and the promised rally is yet to materialize. On the other hand sentiments are overtly bearish and yet we have not seen the capitulation. The immediate downside appears limited to 1280 and the upside potential is somewhere between 1360-1380. ( Very short Term for next few trading days) The seasonality favours the bull in the very short term but the bears are in control of the intermediate term, till Bernanke shows up.
I think we will see violent and volatile price movement for the next few weeks till the FOMC meeting and much panic will be created here in USA and in Europe that will help the Fed to open its purse string. It is only too willing to help but needs some clock and dagger to perform and appear non-partisan.
The investors should avoid the market till the FOMC is over and we know what is in store. Cycles are down for major part of June and even if it manages to rally to 1380, it will be a counter trend rally and risky to participate.
The markets are closed on Monday, May 28th in USA but open in Europe. It will be interesting to see how the markets open here on Tuesday. If Europe manages not to blow itself up on Monday, next week has promise to have some action. In the mean time enjoy your long weekend.
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