Fed Speak

The market has been in a bit of a holding pattern the past few sessions. I'm not sure whether that's about to change but we're sure to get some volatility spikes tomorrow afternoon.  I'm still following my take on things laid out in the prior posts. Essentially 1) I think there is lots of overhead resistance into a wide overhead Trading Range (see below), 2) I'm looking for a pullback of at least 33% - 50%, and then a subsequent advance above this trading high to confirm the move off the bottom, 3) and I believe it's a bad idea to chase this market since its going to be bobbing about in the trading range for quite a long time.The Dow it's having a tough time so far breaking 8000 and staying in the T Range for starters. 

The SPX has held the upper end of the band, which is a plus, but we know how quickly that can change. Look for support at the 55d ema (blue), then the low band, followed by 775. I think 800 is going to hold, which could set up the a nice trade to the 9 handle. 869 has been a solid resistance level so far. I need to see it get through 869 first, along with the upper band and prior trading highs at 875. Tomorrow we may see a push up above 875 only for it to reverse. So stay on your toes.

Other areas to keep an eye on. The 30 year bond (USB) sold off sharply and broke support. Its currently at its 200d sma @ 124. I'm actually looking for a sharp reversal higher during the Fed speak. The Fed's going to try to talk the bond yields lower. There's a lot of folks betting on a turn around tomorrow - something that they are either counting on or more likely praying for if they're loaded long. If the Fed doesn't firmly address  their desire for lower yields, there will be a blood bath for the longs. In the very least, I'm looking for a short term long trade w/ a move back to 127.50 believing that 200d holds. Note that it's only an initial plan subject to change. I'll work off a long Bond bias  and adjust accordingly in real time. Depending upon what the tape is saying. For instance if it's weak as hell, I'll throw out the idea of going long and may buy the short 10 year (TBT).  

Look at the 10 year yield which is pressing resistance at 3%. Higher yields, above 3%, spells trouble for a recovery and low mortgage rates. A higher yield on the 10 year, obviously, is not good for the stock market. My initial bias is long the TLT or a declining yield. Subject to change in real time.

On a side note, I'm short gold (DZZ) and we could see a huge sell off. If I'm wrong, I'll get out. 

The Summation Index (an advance/decline) indicator has put in a strong run from the March low @ -1000 to +836. That is a big move folks. This is hard to trade off of though and tends to lead one astray. It's past history  and it appears to have made it's run for now. But it shows supportive breadth and that in itself is good. Bottom line - there should be some good trade set ups approaching with fat risk reward parameters. Make sure that you employ good risk control techniques and avoid the gonzo trade, which usually doesn't work anyway, during big time volatile moves that will reverse in a blink on an eye. Gonzo trades, or over sized positions, relative to your account, is stupid trading.