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Jason Haver: Get Ready for Whipsaw Wednesday


Fed-speak days can make for tough trading; here are some levels to watch.

Today is Fed-speak day, which is always loads of fun for traders, as the market usually gyrates wildly while people try to interpret the meaning of "Yes, we're going to taper, but not today or tomorrow, maybe next month, but probably not, but we could..." and so on. Things will be especially interesting today, since I've received news there was a major standoff at the Fed yesterday. An exclusive source, who goes only by the code name Norelco, has informed me that the Beard has finally shaved off its Bernanke and is staunchly refusing to relinquish the Chair position, claiming it "won't look right" on Yellen.

Expect the Beard to do most of the speaking today.

On a serious note, keep in mind that the first move out of Fed speak is often a head-fake, and frequently leads to a quick reversal.

Moving on to the charts, we have the potential for a challenging setup at the moment. From an Elliott Wave perspective, I've continued to marginally favor a new low, and a trip into the downside target zone of 1760-70, followed by new all-time-highs -- but looking at the charts from purely a classic technical-analysis standpoint, the recent rally was rejected at a key trend line, and a sustained new low from here would give the charts a bearish appearance. Folks who trade moving averages, however, will note that the 50-day moving average on the S&P 500 (INDEXSP:.INX) currently crosses 1765.76 (which is suddenly curiously close to my standing "perfect world" target of 1765.33), and the 50 MA frequently provides support/resistance. So beyond the preferred Elliott Wave count, there's still hope for bulls on a new low.

Despite the appearance of numerous "head and shoulder-ish" (of course that's a word!) patterns on SPX, I still feel 1760 (+/-) is the more important intermediate pivot zone -- so as long as we do not sustain trade beneath that zone, I'll continue to favor any new lows as the anticipated final decline of wave C of (4) down. That's anticipatory, though, and subject to real-time feedback from the market; I would remain very cautious as a bull here (as I've mentioned since December 2), since I believe the charts have stored potential energy for a nasty decline if there's any hint of ugliness from the Fed today.

Hopefully my readers are in a good position to capitalize either way, since the preferred count has tracked exceptionally well for several weeks and has kept us on the right side of the trade.

Click to enlarge

Monday's rally captured all the upside targets that were published on Friday, then stalled right at the pivot zone. I've added some new signals to watch on the 3-minute chart below:

Click to enlarge

Note the rally also stalled at the red trend line on the 30-minute chart:

Click to enlarge

Looking at the more bearish side of the trade, the Philadelphia Bank Index (INDEXCME:BKX) gives bulls something to think about:

Click to enlarge

On Monday, I ended the update with the following paragraphs, and I'm going to reprint them again here, since there's still been no material change (though the upside targets have since captured):

In conclusion, there's been no material change since Friday. This is perhaps an overly bold call, but I'd still like to see a near-term rally to the above-noted targets (on the 3-minute chart), followed by a near-term decline to 1760-70, followed by an intermediate rally to the 1825-1840 target zone…

The near-term alternate count is that wave C bottomed at 1772, while the intermediate alternate count is that a more bearish leg is underway. To this point, the market hasn't done anything unexpected to cause us to favor an alternate view -- but the market always reserves the right to do so at a moment's notice. Trade safe.

Follow me on Twitter while I try to figure out exactly how to make practical use of Twitter: @PretzelLogic.

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