Today’s action was up, as we expected.
Last Friday, I wrote in Thursday, 3/24/16 – Review of Action Before Good Friday 3 Day Weekend – about how I got suckered into shorting just because of my fear of missing out. I reflected upon this mistake and determined that the drop was an extended 4th wave extension and that we would be moving up, not down. Everybody was short and I decided being short was not the right path and wrote about it in detail above.
So I had to exit my short and I went long instead. Today, that long paid off as the market rallied and S&P Futures (ES) hit over 2045, giving subscribers who followed along a profit opportunity of $750. We also initiated a new trade today after Yellen said that they have to be careful about raising rates. So that’s dovish for the economy. Effectively, she told everyone to jump into the market.
Here are some dovish statements she said with hesitating language. Because raising interest rates puts brakes on the economy, by hesitating about raising interest rates, the market interprets that as bullish:
“I consider it appropriate for the committee to proceed cautiously in adjusting policy,” she said.
“Reflecting global economic and financial developments since December, however, the pace of rate increases is now expected to be somewhat slower,” Yellen noted.
“[F]oreign economic growth now seems likely to be weaker this year than previously expected, and earnings expectations have declined,” she said.
Of course, this is applying logic to the markets and as we all know, it’s not about logic — it’s about sentiment. Still, her language provided that feeling that the Fed will take care of everything so the market rallied.
This chart was calling for a 5th wave up over 2050. Today we challenged the prior highs of 2047 and are likely to higher.
Today the Daily chart shows the follow through we expected:
Even though we were temporarily under water on our trade, we held on and it paid off: