Today's F_O_M_C policy statement is probably the most anticipated of the year, ironically it's also likely to be one of the biggest snookers. The F_E_D is expected to end QE and with it a 5+ year long of market addiction to F_E_D liquidity, but on the dovish side, they are expected to retain the "Considerable time" language in the statement with regard to interest rates (staying low or before the first hike). Personally I think the DOTS of forward F_E_D Funds are going to steal the show.
Yesterday we ended the day extremely overbought just like October 14th and 15th and in fact the entire decline preceding it, extremely oversold as we saw in breadth indications from yesterday. Yesterday also hit every conceivable technical target except the ATH, while forming the chimney I had drawn Monday as a possible scenario for the next day (yesterday), that's the Igloo/Chimney top and head fake. This is the kind of sentiment shifting rally I was looking for back in mid October, but nothing in the way of underlying conditions, those rotten pilings holding up the pier has changed, in fact another of the market darlings has fallen with NFLX, this time FB on slow growth and rising expenses, like I've said so many times, "The leaders of this bull market will not be the leaders of the next", assuming we don't enter a secular bear market which I think is high probability, but that's a different bridge.
As for the charts, well they managed to keep futures unchanged for the F_O_M_C, but there's trouble that was evident last week and has only grown worse since....
I'll be looking for leaks as the F_O_M_C statement is out early for the media on embargo, but they know in advance what the decision is, where the dots are, etc. It's rare to find a leak, but on at least 3 occasions in the past we have found clear leaks that we traded in to the F_E_D and were right on.
As always, beware of the F_E_D knee jerk reaction, and I mean knee jerk, a big emotional move. If it looks parabolic, it's probably safe to assume it's a knee jerk, be careful, they are wrong more often then they are right.
Remember, no press conference so 2 p.m. is it.
We also have the BOJ's meeting decision Friday coming up.
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