August 30, 2016
By Geoff Bysshe
The last week of August is living up to its reputation as a time when most of the market can fall asleep, while a few areas get all the trading attention.
The markets were today but don’t take assume all is calm… IWM has a very unusual pattern that often leads to a nice trend move soon after this pattern forms! More on this in today’s video below.
In filling in for Mish, yesterday I began a series of “big picture chart points” with a tactic for timing the market using the 10 DMA.
Today I’m going to highlight another simple and big market inflection point that can help you determine which side of the market to be on. I’ve also posted a “Trades & Tutorials” video on this same topic today titled, “Fed Day Trend Signal”
The big picture chart point is the range of a volatile “Fed Day”.
On Friday the market reacted with increased volatility to the remarks Janet Yellen made in her speech at Jackson Hole. This is typical market action for a day when the Fed releases much anticipated hints to any future changes to Fed policy (i.e. briefings from their FOMC meetings).
The most important reaction to Fed news, however, is not the day it’s released.
The most important market reaction to a big Fed day is in which side of that day’s range (high or low) is broken first.
In other words, right now you should be looking at which ETFs and markets are trading above or below last Friday’s range. None of the SPY, QQQ, DIA or IWM have moved outside of this range yet. When three of the four are all beyond Friday’s range you should look for the market to continue in that direction.
If you combine this concept with the 10 DMA tactic I spoke about yesterday, you’ll understand why XRT and XLF had such nice moves today (in opposite directions)!
In today’s video I’m going to look at the Modern Family with the insight of our Real Motion indicators and discuss the rare pattern that exists in the IWM right now!
Every day you'll be prepared to trade with: