Post FMOC Quicky

I’m going to make this a quicky as I’m feeling a bit sleep deprived after a three day non-stop barrage of petardos (spanish firecrackers) and unbelievable loud street music right below my window starting at noon and not ceasing until 4:00am. Whatever poor creature looked back at me this morning in my mirror seemed rather ruffled around the edges. Fortunately it all ends tonight and once all the delinquent riff-raff skips town we Valencianos finally get our beautiful city back.

So looks like Yellen is going to keep the taper going plus there’s now an expectation of slowly rising rates starting next year. Nothing really outlandish and thus far equities seem to hold the line. Today’s session does however add additional and valuable context:

You can see that the 25-day SMA has been holding up – after an emotional FOMC spike lower we are now painting somewhat of a hammer. Our NLBL also still remains in place and that means that the spoos are facing a converging wedge (as the SMA is rising).

Zooming in a little we are now looking at that hammer candle which (if closing in the red today) will afford us a Retest Variation Long (RTV-L) trigger. IF that does not happen then we still have that NLBL just six ticks higher. And if we do get a hammer of any sorts (green or red) we do have a hammer long in an uptrend. I have highlighted the recent series of stacked spike highs and spike lows and the recent SL is a violation officially, which given the overall context I choose to ignore – for now.

On the downside we also have the potential for a failed hammer, which would lead us toward that NLSL at 1823.5. I do like this configuration and I think we are sitting near a technically valid inflection point. Let’s see where it leads us.

Some of you guys already mentioned that we triggered a VIX buy signal yesterday (rules on our cheat sheet). Which usually means that the odds suggest higher prices in the coming week. However, given that we are very near the 13.5 support line I’m not too thrilled about tIV downside potential. But that does not necessarily mean price can’t climb higher with IV remaining flat. So let’s stick with price as usual – it’ll point the way.

UPDATE 3:20pm EDT: Looks like the hammer is bust as we’re probably going to close lower for the day. That however still leaves RTV-L in place as a potential setup. The odds of that scenario triggering tomorrow are probably low. The upside – if you went short near the NLBL at 1869 then you are in good shape right now 🙂

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Cheers,