Global Complexities

posted Sep 22, 2014, 7:21 PM by Katie Shook   [ updated Sep 22, 2014, 7:22 PM ]

Last weeks price action on the SPX was interesting.  Intraday it managed to nearly hit the 2020 resistance figure (topping out at 2019.26), only to come tumbling back down to 2010.  The consolidation continues.

Volatility was not unexpected as we had a Quadruple Witching on Friday, as well as a rebalance of the S&P500.   What was interesting was to see the pull-back rather than push forward.

This week the story is shifting to Europe and China.  Both economies are showing troubling signs.  Europe can’t seem to get a coordinated stimulus plan together to encourage growth (methinks this could be more of a long-term demographics problem than folks are as yet willing to acknowledge).  And is China due for an economic slowdown as well?

Over the weekend the ES (S&P500 futures) dipped.  As of this morning they’ve recovered somewhat.  But the price action is indicating a lower open with weakness today.  It’s likely we’ll see a re-test of the 2000 level this week.

Here’s what I think is the focus this week:  Friday’s GDP number.  It’s speculated that last quarter’s GDP was manipulated to get the big figure (especially after the miserable Q1-2014 print).  Europe and China are important over weeks and months.  GDP is likely to drive speculation this week.  A strong print could be a ‘good news is bad’ event in light of Fed policy.  If so, we could see a short-term shakedown of equities.   Or will be continue to see the Goldilocks market?

Frankly, this market is day-by-day.  We’re likely to continue bouncing between 1991 and 2020 this week.  To say there’s a strong macro trend is to ignore the complete lack of any real volatility in this market.  The big picture continues to point to higher figures.  But where is ‘normal’ volatility?  Where is the typical pull-back?  The cocktail of Fed stimulus and HFT have certainly sheltered this market from any meaningful corrective moves for a long time now.  But nothing lasts forever…

Daily Digits

Daily Digits 9-22-14

Weekly Estimated Range

Weeklies 9-22-14

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