April 30, 2016
Trades & Tutorials
By Geoff Bysshe
Last week the Fed held a two day FOMC meeting, and earnings season was in full swing, but the biggest market moving news came out of Japan.
The BoJ’s decision not to provide the markets with another “fix” of QE sent its own markets into a free fall, and pushed U.S. stocks into the worst down week since the lows of February. This is a bad sign for the markets for a number of reasons.
First, it suggests that the market is still too addicted to QE, and may be willing to overlook our Fed’s reluctance to ease only because it believes it can get its fix from another source (i.e. Japan or Europe).
If this is true, then what happens if foreign central banks decide to follow the U.S. Fed’s lead and stop QE!
Second, it highlights the already known fact that the U.S. markets are very much influenced by global markets.
Sometimes it’s short term, but even so, short-term can have long term implications. For example, last year’s August flash crash was sparked by concerns over slowing growth in China, and fears of devaluation in the Chinese currency.
Did you notice that only the QQQ made a new high after that crash? In fact, the IWM is still lower than where it was when that market slide really began?
However, last week was not a market crash or even a major inflection point, but it was a warning sign that the bulls are now on a slippery slope.
The media will focus on last week’s percentage declines, but that’s not really what you should be concerned about.
In this week’s video I outline several reasons why the current shallow pull back is not the same as the ones that have been good buying opportunities since February, and what the market has to do in order to put it back in a more bullish mode.
If you’d like to learn more about the real motion indicators used in this video, then go here.
If you'd like more information about the indicators in this video go here
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