Collecting QE3 Data...

The F_O_M_C / F_E_D released QE3 upon the masses of traders that are convinced they need a steady intravenous drip of Quantitative Easing to raise asset prices, so much so it appears they have inflated asset prices in what has become known as "Front-Running the F_E_D" in anticipation of September 13th's announcement, that's how convinced they were that QE3 is not only coming, but they needed to buy  in anticipation of this event, that in their view will lift all boats to all time new highs in to the stratosphere.

On that day I posted that my "emotional" reaction would be to tell everyone to close all shorts, but everything long and just hold on, but I didn't. I said, "Lets collect the data, the evidence" because history may rhythm, but it doesn't repeat and we have many things that are much different now than at QE1, 2 , Twist 1 and 2.

I have gone over the differences, not to justify a position or opinion that QE3 will be a dud, but just to point out that we can't just assume. 

Here is what I am now watching in the market to get  feel for what is happening in underlying trade, how the market is reacting to QE3 announced. I will point out there have been numerous articles that didn't appear in past QE and numerous opinions and facts about how this time it's different. We just heard from Goldman Sachs who has lowered Q3 GDP guidance 2x in 2 days (consecutively). Also from GS, their clients are more concerned with inflation and its effect on stock prices than they are happy about QE3, in fact they are concerned QE3 will bring about inflation and asset price shocks, they connect QE3 and blame it for their concerns rather than celebrate it. Goldman's own Chief Equity Strategist has his year end S&P forecast at 1250 since the start of the year, QE3 didn't change that so he thinks the S&P falls as QE3 is unleashed.

Lets face it, since QE3 was announced, the market hasn't performed all that well.

One scenario I thought about as QE3 was announced is, "Smart money isn't going to chase prices higher, they'd likely pull the market back and accumulate at lower prices". So along that line of thought, here's what I continue to watch and what I'm watching out for, but so far, I'm not seeing it.

 From the SPY 1 min chart, here's a negative divergence after the 10 a.m. ISM bounce, then the positive divergence I mentioned just a bit ago and a move higher, a 3C/price pullback. Remember I said the divergence is out to about 3 min charts in most cases, still all intraday timeframes.

 SPY 2 min chart, positive at the dip in the white box, price moves up in to a larger negative divergence, still we have hints of a small positive today as mentioned and 3C/price in line at the green arrow.

 The 3 min trend and today shows a series of smaller negative divergences sending price lower at each, today we have an even uglier leading negative divergence in to price moving up, that's typical of selling in to price strength.

 SPY 5 min sees NO positive divergence through this entire timeframe, but it does have a negative and leading negative divergence as prices move up on this wave within the downtrend. So far, this is not bullish behavior and doesn't show the signs of accumulation in to lower prices on the theory that I was watching for in prices moving lower.

 The 15 min was already negative in to the QE3 announcement and even though I've been trying to collect data post the announcement, it seems this chart was still very much relevant as price responded to the negative divergence. Note also here on the 15 min chart, there are NO positive divergences, so no accrual of accumulation.

 The 15 min chart on a closer view, no positives, just in line counter trend waves in the move down, but there i a negative divergence here.

This is what I was watching for in the theory of lower prices that could be accumulated, which isn't something I expected, just something to watch for. "IF" price moved lower and 3C moved higher like you see with the arrows I've added, that would indicate a positive divergence. A positive alone wouldn't support the idea of accumulation for QE3, it would need to be large, but that is what I have been watching for and so far nothing. That's what I'll continue to watch for as long as prices move down. If prices move up, I'll be watching for either leading positive divergences, in line trade or distribution in to higher prices. So far we've been able to start answering the QE3 question and so far it doesn't look as positive as the market assumed.