The FOMC is expected to maintain the pace of the taper at $10bln per month, dropping asset purchases to $25bln per month, on track for a QE exit in October. There is no new summary of economic projection, a.k.a. “dot plot”, or press conference, so the market focus will be on the FOMC’s accompanying statement.
Economic fundamentals suggest the economic recovery in the US is back on former footing following adverse weather conditions during the winter months that impacted economic data, and the markets confidence in the recovery. Source: livesquawk.com
Yesterday was Cycle Day 3 (CD3) that played out perfectly with both scenarios…Scenario 1: “IF price penetrates and converts 1977.50 (2 day high), THEN there is a 65% chance of achieving a high between 1978.75 – 1980.50.” Scenario 2: “Failure to convert 1977.50 suggests further back n fill consolidation required, with initial support marked between 1970 – 72 zone, then 1966 – 68 zone. Violation of prior day midpoint targets prior low at 1960 – 62 zone.”
Actual High of Day (1979.50) within projected target zone…Low of Day was a direct hit @ 1962.00…So the Cycles are playing out as expected as average ranges continue to be satisfied as back n fill consolidation within larger bullish pattern.
Note: Today begins Cycle Day 1 (CD1); Average Range = 18.75 Odds of Decline > 10 = 70%; Odds of Decline > 20 = 40%
Today’s hypotheses:
Scenario 1: Prior Day Low (PDL) is 1962.00…IF this low does not get violated and holds any retest, THEN upside retracement targets the 3D CPZ between 1969.75 – 1971.25. which will be viewed as initial resistance zone. Penetration and conversion if this zone increases odds of 1973.50 – 1975.50 Breakout Target Zone being achieved. Failure to find buyers in sufficient quantity above 3D CPZ, suggests a pullback to test prior low at 1962.00
Scenario 2: Violation of Prior Day Low (PDL) 1962.00, suggests sellers continue to have control with 45% chance of 1960.00 – 1958.50 zone being achieved. Extreme downside projections measure 1956.50 – 1954.50, with deep extreme at 1952.75.
Trade Strategy: With today’s FOMC, trading may be subdued until mid-afternoon announcement…As such, we will look to trade both sides (long & short) from key Decision Point (DP) Levels. Current cycle (CD1) favors a lower probe for a “secure low” from which to stage next upside rally. So stay alert to dynamic opportunities. ALWAYS USE STOPS!
Good Trading…David
Habitude Nine
I will identify my mistakes and learn from them. I am optimistic, realistic and honest. I will not make up stories about the good or bad things that occurred in the past or are happening now. I admit when something is not working. My optimism gives me faith and courage. I will not fall prey to blame and fear.
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURES RESULTS