FOMC Day

Here we are at FOMC day again.  It seems to me the market is positioning for a rally today and to sell the dollar.  Sell the news perhaps?

If you ask anyone why stocks are going up they will say it is because the Fed is backstopping the market, QE forever, etc.  Stocks are grinding higher but bonds are bid too and gold and copper look toppy.  David Rosenberg calls it "deflationary growth".  The prospect of more QE has kept a lid on the dollar so far.

All this means if the Fed do not signal any new easier money policy we are at risk of a drop and the dollar will be bid.  Remember that the last market peak was the last FOMC meeting when the Fed announced QE lite and the market was hoping and positioned for much more.  The last quad witching option expiration in June was followed by a massive rally to start the following week followed by a couple of weeks of drop and I would not be surprised to see this pattern repeated.

The FTSE, despite its big breakout put in a weekly gravestone doji last week warning of a possible reversal.  The high of the doji has been exceeded but it is starting to look tired and a pullback to support might be coming. The rally off the lows of 25 August has been marked by very shallow pullbacks, making it hard for trend traders and those waiting for an entry to get in.  The market is at the 78.6 fib retracement of the drop from the April highs and I am looking for a pull back here to test the big SR level at 5450 but I think that a retracement to 5300-5330 more likely.

S&P 500

Diamond patterns work better than head and shoulders (which I don't like) and this one projects an upside target of 1248, we shall see if we get there.  For now we are at the 61.8fib retracement of the big drop from April and a *common* level for markets to pullback before continuing.  A break of the 1130 previous support level says a bigger correction is underway and 1090 is next.  However a measured move target (if this swing is equal to the swing 6Jul-9Aug) gives an upside target of 1158 so I would not be surprised to see a spike up first.

Dollar Index

See August post.  There is no doubt this chart looks ugly but the 80.30 level is big previous yearly support.  One of those lines in the sand for me that you buy above and sell below.  So far it is holding and until it breaks I am buying dollars.  A break of this trendline and this level and I think we go back to the bottom of the big weekly wedge just above $75.00 ... QE forever!

Crude 

Broke out of the ascending channel last week and back inside the rally is halted at the 61.8fib.  I am short looking for 72.

Gold.
Contained in a rising channel and I don't see a trade here unless you are already in.  A pullback to support at 1262-1265 and the channel bottom looks next for a long entry but I prefer to wait for a break of the channel to short.  As we are at new highs I am using fib extensions for resistance and my levels are 1280 and 1300

Some currencies to follow later ...

Position update:
I am short crude from the double top  at 78.00 (1/4 postion left) and added at 75.50 post FOMC.

I also bought USDCAD following FOMC - triple bottom off the 1.0220 level.  it isn't quite the bottom of the wedge so we could have one more push down this week but I thought it was a good R:R trade.