Sometimes you have to pull them down to push them up. Right now, that is the way this market is. The market's push higher and subsequent hang for the better part of a month appears to have set up a sell the news
situation for Bernanke’s Jackson Hole speech.
It all fits together nicely: Pull them down before Bernanke and watch the ECB push them back up again.
I recently talked about the idea of applying the engineering principal of mean-time-to-failure to qualified trends
. As of yesterday, the needed reset of the short-term trend by breaking a swing point low has yet to occur which now pushes the probability of that reset to the 85% level. The swing point low that needs to break is at $1395.62 on August 10 as shown here.
Note how that fits in nicely with the anchored support zone that has formed right below that price point.
A pull down to break that swing point, increasing fear a bit, and then pushing back higher on the expected ECB action seems like a pretty good set-up at this point. Now maybe it is too clean and perfect. There is the possibility that a move lower overruns anchored support -- and if it does, the next area is around $1360. That is a possibility one has to account for.
Of course, Bernanke could surprise us and either announce or engage in another round of quantitative easing. We all know he keen he is on pushing paper out until he gets the inflation wheels rolling again. In that case, the anchored resistance is clearly the two swing point highs overhead and and any push through that area will take us to an anchored resistance of $1340-$1345 (not shown).
With the way this market has finally set up, this certainly looks to be one of those situations where down may end up. That’s what I’m looking for now.
No positions in stocks mentioned.