There is a reason we have issued a disclaimer both here and on our radio show as the markets were heading lower. The disclaimer simply stated that if QE was indeed reinstated, all bets were off on the downside. Conveniently, as the Fed wound down its QE program (FOR NOW), the BOJ ramps it up. How about that? Nothing to see hear. Ladies and gentlemen, you get to decide if this was a coordinated effort as markets were crumbling. You get to decide if all this was leaked in advance which turned imploding markets into a bullish romp. Of course, there is never ever any chicanery going on between government and Wall Street. You obviously know what we think.
That said, markets have loved QE…and we know any weakness will result in Yellen going back to QE also. So markets are still listening and listening well.
Technically, this V-shaped move is what we call an outlier event. But as technicians, we deal with what is in front of us. We thought the big reversal was a near-term low and would lead to upside testing but no way we believed all the way into new highs. With markets more stretched and overbought to the upside than they were stretched and oversold to the downside, one would expect some backing and filling…eventually. We thought that would occur around 50 day moving averages but that lasted one day.
We will know a lot more this week on how the market takes in the V-shape. Not jumping the gun.
Lastly, make your vote count by going out and vote.