On Monday’s post: Monday, 3/14/16 – Overnight Consolidation Found Support at 2002ES, I talked about how although we could potentially see a bear drop in this region, the longer it doesn’t happen, the higher the chance that we will just go up:
“The fact that consolidation happened for so long is, in my opinion, not good for the bears. Further, the fact that support was found at 2002 – which is just a few points away from where prior resistance (now support) was — at 2000 — tells me that it won’t be that easy to move back to the downside. The fact that we rallied so fast and hard from the 1960 support also tells me that we might not get that major downside that we were open to getting. As each day consolidates, it’s becoming less and less likely that we revisit the 1800 lows. Those lows may have been the wave IV down and we are on our way to new highs.
While this region was an opportunity for a wave 3 down to begin — the market hasn’t followed through. So I have to lean upwards for now – unless we see some strong clues soon–as in overnight — a break of today’s low at 2002 would be a minimum requirement.”
These were hints that yesterday’s Fed action would turn up – which it did.
Overnight, we did get a sharp 20+ point drop from 2027 to 2005 — it turns out that drop was a wave 2 drop before a wave 3 rally, which happened today.
Given teh size of A-B and a-b coiling up for the 1-2-3 — I don’t expect the wave 3 to just stop at today’s high. There could be some consolidation, but I would expect a continued push higher into tomorrow – or at least a consolidation. not expecting a big wave 2 drop like we got overnight last night. Unless we form an ending diagonal of some sort — if we spend most of tonight in the 2020-2030 region, that would be a possibility.
This morning did get me a bit spooked out. After touching close to 2005 – and bouncing — if we had turned back down, that would have been bearish. But we didn’t, and our bullish trade alerted to subscribers yesterday shortly after the fed announcement is now well in the green.
I noted this morning to subscribers that if Russell were to go below 1060, I would have a bearish view on the Russell. Neither the 1060 in Russell nor the 2005 in S&P were tested – and the market went pretty much straight up.
Lastly, I think this is a pretty reason why markets are rallying in light of the Fed announcement. Target inflation is on path and revision from 4 rate hikes this year down to 2 = continued Fed-induced market rally?