Fed’s Pianalto Spooking the Stock Market
The stock market has been trading back and forth in a tug-of-war between the bulls and the bears.
These triangular patterns typically have 5 passes back and forth before breaking out. Elliotticians label these as an a-b-c-d-e pattern. Well, right now, we’ve seen the completion of 5 back and forth moves. So from that point it doesn’t take much to encourage a breakout. And I believe we may have found the catalyst with this morning’s speech from the Federal Reserve’s Pianalto. See the comments below. Click on the visual to enlarge it.
Even though Fed’s Dudley seemed to have more encouraging words to say…Pianalto’s came first and the market ran with it. This causes the S&P 500 to breakout to the downside out of its symmetrical triangle pattern. If this closes this way…”look out below!”
Click on the chart to enlarge it.
If this breakout to the downside remains…then it will be time to bring the defensive players back onto the field and “bench” the offensive players.
One of the best defensive players (for now) on the “currency team” is the U.S. dollar. If stocks continue to hold below the triangle, then being long the dollar and shorting other foreign “offensive” currencies against it could be the order of the day.