Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
AMAZON (AMZN) - Primary AI Tech Stock Investing 2020 and Beyond - Video - 21st Jan 20
What Do Fresh U.S. Economic Reports Imply for Gold? - 21st Jan 20
Corporate Earnings Setup Rally To Stock Market Peak - 21st Jan 20
Gold Price Trend Forecast 2020 - Part1 - 21st Jan 20
How to Write a Good Finance College Essay  - 21st Jan 20
Risks to Global Economy is Balanced: Stock Market upside limited short term - 20th Jan 20
How Digital Technology is Changing the Sports Betting Industry - 20th Jan 20
Is CEOs Reputation Management Essential? All You Must Know - 20th Jan 20
APPLE (AAPL) AI Tech Stocks Investing 2020 - 20th Jan 20
FOMO or FOPA or Au? - 20th Jan 20
Stock Market SP500 Kitchin Cycle Review - 20th Jan 20
Why Intel i7-4790k Devils Canyon CPU is STILL GOOD in 2020! - 20th Jan 20
Stock Market Final Thrust Review - 19th Jan 20
Gold Trade Usage & Price Effect - 19th Jan 20
Stock Market Trend Forecast 2020 - Trend Analysis - Video - 19th Jan 20
Stock Trade-of-the-Week: Dorchester Minerals (DMLP) - 19th Jan 20
INTEL (INTC) Stock Investing in AI Machine Intelligence Mega-trend 2020 and Beyond - 18th Jan 20
Gold Stocks Wavering - 18th Jan 20
Best Amazon iPhone Case Fits 6s, 7, 8 by Toovren Review - 18th Jan 20
1. GOOGLE (Alphabet) - Primary AI Tech Stock For Investing 2020 - 17th Jan 20
ERY Energy Bear Continues Basing Setup – Breakout Expected Near January 24th - 17th Jan 20
What Expiring Stock and Commodity Market Bubbles Look Like - 17th Jan 20
Platinum Breaks $1000 On Big Rally - What's Next Forecast - 17th Jan 20
Precious Metals Set to Keep Powering Ahead - 17th Jan 20
Stock Market and the US Presidential Election Cycle  - 16th Jan 20
Shifting Undercurrents In The US Stock Market - 16th Jan 20
America 2020 – YEAR OF LIVING DANGEROUSLY (PART TWO) - 16th Jan 20
Yes, China Is a Currency Manipulator – And the U.S. Banking System Is a Metals Manipulator - 16th Jan 20
MICROSOFT Stock Investing in AI Machine Intelligence Mega-trend 2020 and Beyond - 15th Jan 20
Silver Traders Big Trend Analysis – Part II - 15th Jan 20
Silver Short-Term Pullback Before Acceleration Higher - 15th Jan 20
Gold Overall Outlook Is 'Strongly Bullish' - 15th Jan 20
AMD is Killing Intel - Best CPU's For 2020! Ryzen 3900x, 3950x, 3960x Budget, to High End Systems - 15th Jan 20
The Importance Of Keeping Invoices Up To Date - 15th Jan 20
Stock Market Elliott Wave Analysis 2020 - 14th Jan 20
Walmart Has Made a Genius Move to Beat Amazon - 14th Jan 20
Deep State 2020 – A Year Of Living Dangerously! - 14th Jan 20
The End of College Is Near - 14th Jan 20
AI Stocks Investing 2020 to Profit from the Machine Intelligence Mega-trend - Video - 14th Jan 20
Stock Market Final Thrust - 14th Jan 20
British Pound GBP Trend Forecast Review - 13th Jan 20
Trumpism Stock Market and the crisis in American social equality - 13th Jan 20
Silver Investors Big Trend Analysis for – Part I - 13th Jan 20
Craig Hemke Gold & Silver 2020 Prediction, Slams Biased Gold Naysayers - 13th Jan 20

Market Oracle FREE Newsletter

Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Net Commericials and the FOMC Interest Rate Meeting

Interest-Rates / US Interest Rates Sep 17, 2007 - 02:17 PM GMT

By: James_West

Interest-Rates Everybody is anticipating next week's FOMC decision on federal funds target rate, due this Tuesday, Sept. 18. As of last Friday, according to the 30-day Federal Funds futures, there is a 42% probability of a 25-basis point rate decrease versus a 58% probability of a 50-basis point rate decrease. In other words, a rate-cut is priced into the market already. The only question is: will the Fed cut by 25-basis points or 50-basis points. From the Funds futures, we are leaning towards a 50-basis point cut, but only slightly.


(I will update the Funds futures probabilities in an e-mail bulletin on Monday)

The next question is: what are the charts telling us?

Price charts:

One of the best charts to follow right now is that of the S&P 500. Notice how we are seeing a symmetrical-triangle pattern forming on this index. Pending a breakout confirmation, this pattern is neutral. Now if we look at the Russell 2000 chart, the trend is again neutral: we are trading above key support at around 740- 750, and under key resistance at 800 even. The Dow Jones is sitting just underneath resistance at 13 500, well above its August reaction-low at around 12 600. And the Nasdaq-100, the most bullish looking index in terms of its price & COT chart, tested the 2025 level in early September, just shy of its June top at approx. 2050.

In conclusion, I would classify the current trend in the overall market as NEUTRAL. There are pockets of strength, but we need to see confirmation: on the upside I would pay close attention to the S&P 500 (above 1500) & Russell 2000 (above 800) before I become decisively bullish. Conversely, if the market indexes closed below their August reaction-lows (SPX-1380, RUT-740, INDU-12 600, NDX-1825) - that would be an extremely bearish turn of events for US equities.

COT charts:

As mentioned previously, the COT chart for the Nasdaq 100 looks bullish. Meanwhile, the COT chart for the Russell 2000 is finally starting to perk up; also notice how the large trader position decreased to new-lows, typically a bullish indicator. The Dow Jones COT chart continues to show no signs of life, but remains at historically bullish levels. From the S&P 500 COT chart, we see some commercial selling in the last two weeks, but if we look at the 3-year chart, once again this index remains at historically bullish levels in terms of its NET-commercial position.

VIX:

Commercials continue to be sellers of the VIX at the current levels. What I find interesting is that large-traders had their largest net-short position when that VIX was at yearly-highs above 30. Meanwhile commercials had a large net-long position at this exact same time. Were the large-traders right on this market, or were commercials simply hedging risk? From a classical COT setup this market looks bearish: commercials are sellers and large traders are buyers. Come Tuesday, we'll see for certain...

Ahead of the Fed meeting, various indicators are leaning towards a market rally from the current ranges, and not a breakdown. TREND, however, is still neutral. And while we may look at hundreds of signals and indicators, no matter how valid, TREND is by far the most significant in my mind. There are lots of fundamental-worries about the US economy, such as gold & oil trading near record-highs, the US Dollar breaking below critical support at 80, etc etc. But one can argue that an excess in fundamental negatives is a sign of extreme bearish sentiment which is in fact a bullish indicator.

Perhaps, but for me - I let the charts be my guide. And the charts are currently neutral with no bullish or bearish confirmation, yet. The key this coming week is not to PREDICT the markets, but instead to FOLLOW the markets and the new trend if one in fact develops.

Oil:

Crude oil continues to look very bullish. Critical support is at 69 and critical resistance is right around the current close, at 78-80. Notice how net-commercial position barely decreased, while oil put in an impressive rally over the last few weeks. This means that oil is looking bullish from a trend & cot perspective. We may be in need of a rest right around these levels, before we decisively breakout above 80. But as long as oil holds above its last reaction-low (weekly chart), at 69, breaking out above 80 is only a matter of time...

Gold:

Gold's price chart is very similar to oil's, in that they are both sitting just underneath record levels. The trend for gold is clearly bullish, as we broke above key resistance levels at approx. 689 & 699 and never looked back. Commercials are clearly selling into this rally, which is their typical behavior. But as long as gold holds above its support (689/699), we are either going to breakout above 730 near-term, or consolidate first & then breakout above 730. I think gold will consolidate first - before breaking out, but any-body's guess is as good as mine.

USD:

The US Dollar broke below critical support at 80. I previously wrote that from a COT & sentiment perspective the US dollar was painting a bullish picture. As of right now, trend is not confirming that 'picture'. There is nothing positive about this index while its under that critical 80 level. As long as we are trading under 80, one must respect the DOWN-TREND in this market. I will become neutral on the USD only if we closed above 80. A potential breakout above the upper trend-line resistance (3 year chart), at 81-81.5 would be very bullish.

By James West

http://www.buythebottom.com

© 2007 buythebottom.com. All rights reserved

Disclaimer - This article is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment. No guarantee, representation or warranty and accepts no responsibility or liability as to its accuracy or completeness. Expressions of opinion are those of James West only and are subject to change without notice.

James West Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules