Yesterday morning, we titled our daily post with the rhetorical question: “has the Fed found its backbone?”

After 7 years of currency, interest rate and stock market manipulation, is the Fed finally ready to let the “markets” find their own equilibrium and hazard even a 0.25% increase in interest rates?  Apparently not.

From the rearrangement of the dots, we can surmise that the FOMC has become, if anything, more cautious regarding the forward outlook.  Rate increases will likely be later and lower than last forecast.  Our outlook remains that the increase will be minimal or, more likely, non-existent in 2015.

Surprisingly, even the mainstream media is starting to pick up on the “Fed backed into a corner” narrative.   See this INTERVIEW, which aired on CNBC of all places.

The S&P 500 loved this news, and bounced nicely where/when we expected.  Yesterday morning, we suggested a short at 2103.64 (2103.67 was the high) and covering at 2095.61 for conservative traders and the SMA100 (2089) for more aggressive types.

These proved to be the correct turning points, which were followed by an algo-driven melt-up into the close as expected.

Remember, at least 75% of the time, FOMC announcements/press conferences have led to a frenzy of algo activity that drives prices higher into the close.  It’s part of the “FOMC has got our back” meme that investors have come to accept/expect.

The algo was of the crude oil futures variety, with a 3.6% spike from yesterday’s lows through last night’s ramp job which has left the eminis 6.50 points higher a few minutes before the cash open this morning — despite USDJPY’s continuing slump.

Where to from here?

continued for members...The daily chart we posted last night shows both the breakout and the breakdown targets.  My preference remains a breakdown — but, not until next week when the SMA200 reaches the .886 at 2050.52.  It’s currently at 2049.76.

In the meantime, I can easily imagine a pseudo breakout that reaches the white .786 or .886 (yellow dot) into the end of the week.  Today is the key, as there’s plenty of economic news coming out and the Greece situation continues to deteriorate.

UPDATE:  10:30 AM

CL is reversing above the purple channel bottom, but SPX has reached its purple channel midline.  I’d either take profits on the long position here at 2117, or at least set stops here in the event that the rally runs out of steam.

Aggressive traders might wish to try a short here for a backtest of the SMA20/falling red channel at 2106ish (tight stops, of course.)
Note that USDJPY is even getting into the groove, with a sudden reversal back above the red midline.

I have to be out of the office for the rest of the day, but will update charts again this evening.

GLTA.

UPDATE:  8:20 PM

I must say, that worked out fairly well…