When the S&P 500 stayed above 1400 after hovering around the level for most of the first half of August, it seemed inevitable that the index would break to new highs. Yesterday, it finally did, but the weakness of the move yesterday, and its subsequent failure, was not a big surprise considering the lack of energy in this market and the weak breadth leading up to the move. Now that we’ve had a false breakout, what does that mean going forward?
Well, eyes shift back to our central banking masters. The FOMC minutes today will be watched for any mention of QE3, though they hold less than normal importance given how much the financial market landscape has changed in the past month. Mr. Bernanke speaks at Jackson Hole next week, and then the Fed decision will be on Sept 13th. Tim Duy wrote a good summary discussion about the diminishing chances of QE3 heading into the meeting.
Overnight price action was a quiet, but slanted to the red after the SPX reversal:
- Asia closed broadly in the red, with most markets down 0.25-1%
- Europe has traded in the red all session, down 0.5% right now. SPX futures have also traded in the red all session, down 0.1% right now
- The dollar is higher vs. most crosses, and Treasuries are higher as well. Commodities are broadly lower, though just by a touch. The Euro broke its 50 day ma yesterday, triggering some buy stops. 1.2450 will be the level to watch for support
- FOMC minutes will be released at 2pm