The pin is getting awful close

The pin is getting awful close

 

A Happy Vernal Equinox everyone!

Just one throw-away comment from Yellen yesterday that she would consider raising the Fed Funds rate within six months after the end of tapering was apparently the catalyst for a very sharp sell-off in stocks after they had climbed from Monday’s lows.

The Fed tapering is due to end by the end of this year, but I believe Mr Market (who is really in charge) will force the Fed to raise rates sooner than that.  Stock markets will anticipate this and it now appears the Dow is headed lower in my wave 3.

 

DOW

The hourly Dow chart has clear EWs and with the break of the critical 16,300 level, I am now short:

I have five down off the 7 March high and now an A-B-C with the C wave hitting the upper tramline on a negative momentum divergence.  This is the scenario I painted a few days ago.  Odds are high that the C wave high will hold.  If so, this will be a classic ‘five down, three up’ example for the textbooks.

But look at what’s happening over in the FTSE:

These are terrific tramlines, but the trend is still up and I will be more comfortable with my bearish forecast if/when the lower tramline is broken.

 

GOLD

Fell heavily yesterday but is now testing Fibonacci support:

With gold off $60 in a only few days, I am certainly glad I took profits at the top.  This is a classic illustration of my theme that when a target is touted by everyone ($1400 was the favoured level), it is rarely hit (it came within $10).  If it does happen, then there must first be a wipe-out of the weak longs.  We are seeing such a wipe-out currently.

But will the market bounce off this support? In other words, has the wipe-out removed enough weak longs to support a wave of new buying and short covering?  After all, global tensions haven’t really gone away.

US DOLLAR

Has re-started its long-awaited rally with a big hit on the euro yesterday.  I expect the dollar to make solid progress over the coming weeks/months.  I am short the EUR/USD and looking to position again short GBP/USD.

 

 

chart

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