Wednesday, January 25, 2012

Technical Picture - Bullish Response to FOMC

As discussed in my last post, the SPX chart above shows that since the new year started, we've broken out of the mean reverting pattern we were in over the past few months. The two fib patterns show two ambush setups. The second smaller ambush reached its 23.6% Fib extension target, and now we are moving towards the larger target - 1344.

Last Friday we were looking to BO of the first Fib extension. Monday morning, we blew past the 23.6% FE and drew a new extension (green), but failed to hold the 50-62% retracement. That failure resulted in a fast move back down the ambush zone of the stretched original FE. Buyers stepped in and managed to take price all the way half way back (grey fibs). As depicted below, the bears ambushed EOD and the counter-trend traded to the 23.6% target on the open Tuesday.

Today, bears failed after the release of the FOMC statement. Shorts were squeezed out of positions as price rallied to new highs.

Price reached the the 23.6% FE and now we stretch our Fibs and hope for a chance at a new ambush tomorrow.

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