Bulls Pull Off The Impossible. Fed Low Rate Market In Full Control

On Friday, we saw the problems a vulnerable can have when Brexit occurred. The market had so many negatives going against it that it only took an unexpected shock to the system, such as Brexit, to get the market reeling hard to the down side. The surprise, final vote had the banks falling apart the hardest, but the entire market wasn't far behind. A 610-point loss on the Dow with a 202-point loss on the Nasdaq. Throw in 79 points on the S&P 500, and you had one heck of a bad day for the markets. The best news for the bears was that we had our first true distribution day off a major top in over seven years. All the bears needed was a follow-through day to confirm things. Get the S&P 500 below the 200-day exponential moving average on more distribution volume and it would be time for a true celebration. The bears woke up Monday morning to see the follow-through they had so hoped for, and by the time the day was over, there was yet a second distribution day with the all the indexes now below the key-support level of the 200-day exponential moving average, which, for the S&P 500, was 2037.

No one could blame the bears for feeling excited, and in the mood for a party. It had been so long. The celebration was on in full force. Not only that, the futures were falling further Monday evening. The bears were falling all over themselves with joy. The market was very oversold, but the bears knew that the double-distribution days guaranteed that getting back over 2037 was out of the question. Fast forward two days, and we're well over 2037. The impossible has occurred. The low-rate bull market was pulling its biggest trick out of its hat. Technically and fundamentally it makes zero sense, but the low-rate bullied bull market is all that matters, because in the end the market is back in the range yet once again, the bulls wiping that sweat from their foreheads. Nowhere land here we are again, folks.

Now that the bulls have pulled off the impossible, let's see where we may go. It appears to me that the market is on pause. It seems to be waiting for the right news to hit that will it to finally break out above 2134. The news on the economic front lately has been terrible. A horrendous Jobs Report and ISM Manufacturing Report last month. Also, we had to deal with a very poor, durable, good number last week at -2.2% when expectations were for -0.5%. The market was frustrated because it can't find the right catalyst to get rocking. With the fed fully in control, the market wants an economic number that says things are improving. It'll know the fed may raise rates again, but the level is still so low it can handle a raise. It would be more celebratory of the fact that things are improving economically. Once the right economic report hits, it should send the market flying up towards the 2134 breakout level. Once through its blue skies. None of it makes sense as we are living in the most disconnected bull market in history. Declining earnings everywhere with an historically high S&P 500 P/E at 24. Market should be collapsing. It's readying itself to break out. Technical and fundamental work are being made non-existent. Both useless, for now. The market has been taken over by the fed and may never be the same.

Due to the market disobeying all normal rules meaning trend lines, gaps, and moving averages, the only real resistance and support levels that mean anything are 15% apart. 2134 and 1810. That’s not the easiest way to play the market. One thing you can do is follow the sixty-minute charts, and short at 70, or higher RSI, and go long at 30, or lower RSI. The exponential moving averages are not holding in either direction. The market has gone nowhere for nearly two years. Maybe a strong ISM Manufacturing Report on Friday will be the necessary catalyst to get us above and rocking through 2134. The bulls have hope. They control the market improperly. The fed has created a monster. Unintended consequences are already hitting from higher rental prices to higher housing prices. It's only the beginning. Things will worsen, but not likely for the market.