BarroMetrics Views: The S&P 2014-06-26 II
In my last posting I said that but for QE’s distortion of the price mechanism, I’d have said that the June 25 price action would suggest a down day on June 26. However, because of QE, I did not expect to see this. (Figure 1)
For a while there it looked as though I was wrong, that perhaps ‘normality’ was starting to return. But nope, the S&P started to rally after the large initial drop and at the death, recovered almost all of the loss, giving us a day’s range 15-point (lower end of normal range). Friday produced a small range day (9 points) with about the same volume as the previous day. Again given the context, a sell signal. (Figure 1).
The weekly charts show a bearish context (Figure 3). Since the breakout at 1897 we have declining ranges and increasing volumes. Normally this is not a robust sign for the bulls.
But given the fundamental context, I doubt we’ll see much of a move down. For my part, the fundamental events that are capable of spiking QE’s distortion need time to work, e.g. the effects of FACTA, and perhaps the Senate elections if the Tea Party gain a disproportionate influence. So, I don’t see any substantial downturn till at least mid to end November.
FIGURE 1 S&P Daily
FIGURE 2 S&P 30-min
FIGURE 3 S&P Weekly