Due to no real short interest in the market to buoy declines, markets remain susceptible to mini flash-crash events. Sept 28-Oct 5 is our next window for such an event.
Markets like these are tough to trade and frustrate bulls and bears alike. The blatant intervention by the Plunge Protection Team is not letting the market do what it naturally wants to do - roll over. We suspect this will continue until the close tomorrow after the FOMC policy statement is issued. Unless there is some wild surprise in the statement, we expect the market to roll over Thursday and early Friday for a short term bottom. Most likely, a slightly higher low than last Friday's SPX 3300. The bounce into next week appears limited due to the simple fact the Plunge Protection Team has refused to let markets drop (shown above) to the organic levels they are seeking, SPX 3220. That would have given us an equally powerful slingshot rally back up into the end of next week. Thursday after the close we can forecast price levels for next week, but time targets are September 25 +/-2 days for a top before another round of selling occurs into the first week of October. SPX 3220 and 3110 are the next two levels of support after 3300 breaks. As of now, 3110 should hold all declines into early October and produce a strong pre-election rally into October 21-25.
Expect swings in sentiment and price in September and October to mirror last September and October's decline into an Intermediate cycle low.
Intermediate cycle low - major low that occurs roughly 2 times per year. The best buying opportunities with the least risk and greatest upside occur at these events. A great time for leverage.
Daily cycle low - A profit-taking event every 20-50 days during an intermediate advance. Typically 3-5 of these lows occur in an entire advancing intermediate trend.
We will add a separate terminology section shortly to the gold portal.
We expect the Fed statement to initially drive gold lower only to reverse Thursday for a wild trading day, possibly forming a short term high $1980-$2000 futures. As of now, more weakness off that high into next week is expected. There are many pundits buying miners and gold calling for an immediate breakout of the metals complex based on daily charts. We have shown weekly charts above, which filter out noise and are confirming our October ICL. There remains a possibility for a short term breakout above $2020 futures, but this should be a fake-out move to trap more longs. This is how intermediate tops are formed until the final plunge sometime in October into our ultimate low $1800-$1850. Barring the Federal Reserve announcing a gold standard, we expect more whipsaw to continue into early October before a real plunge occurs.
The dollar can wreck havoc on risk assets tomorrow after the FOMC statement with a breakout over 93.80, which should trigger extension to 95.50. It has been in an uptrend, but suppression by central banks in order to keep stocks elevated into the FOMC meeting has kept a lid on the rally.
We will watch price levels closely to determine if the risk/reward for long trades in biotech and SPX is justified post FOMC on Thursday/Friday. HFZ
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