Monday, March 18, 2013

A Freakish Coincidence?

Do you ever feel worried when things go as expected, but much faster than you thought? As I expected, Cyprus was brushed off by the market. But I did not expect it to be done in one trading session. I also expected the gap fill, but not the one we got today. I thought that market would use this Cyprus fiasco to sell off (and reset) to the SPY gap fill below. Instead, it filled the one above from Friday close. But who am I to argue? Yet I have a feeling something is not exactly right for bulls here. Quick intraday reversal crushed new bears, but may have new bulls sucked in as well.
Today's filled gap leaves no unfinished business above, and perhaps makes the road down even smoother than I thought. It now may even look exactly like the sell-off at the end of February, which culminated with Italian election snafu, but may be progressing much faster this time. I should also note how that sell-off ended. Bernanke checked live SPX quote (his measurement of U.S. economic recovery) on his QuoTrek right before he was to give a two-day testimony to congressional banking committees, and crapped his pants. So he said nothing about scaling back QEInfinity any time soon.
If ES follows that scenario, this sell-off may not be done yet, as there may be a few more days of this left. By a freakish coincidence, there is a two-day FOMC meeting this week, with Chairman speaking at the presser right after the rate decision. He will undoubtedly fight the new European dragon, and behead it with his inaction, despite how oxymoronic that sounds.
Let's dive into the short-term charts to digest the technicals.

click on charts to enlarge

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