Let Us Prey
Tim Knight | Sep 13, 2012 12:43AM ET
In case I haven't been firm enough with this point, I'll state it again: the "oomph!" of each QE has been decreasing each time. I offer the chart below as evidence. I have colorfully illustrated the successive power each round of "easing" has produced for the Dow 30 chronologically.
Green is QE1; Blue is QE2; Red is Operation Twist; Purple is Twist Extension. Only time will tell what QE3 is going to do for the market, but if it ultimately becomes market-negative, then Benjamin Shalom Bernanke is toast.
Of course, nobody knows what the Fed is going to say later today, and absolutely nobody - - not even The Bearded Wonder - - can say what the market's reaction is going to be to whatever news is forthcoming. I am thus positioned conservatively, with two-thirds of my portfolio in cash, but dozens of potential positions waiting in the wings, only to be deployed if the post-announcement environment seems favorable.
I think the 1.3 level on the euro is mildly important, although an Unlimited Easing Announcement could slice right through that level.
I continue to watch the ascending wedge on the S&P 500 as a guide for potential resistance.
Even more important, though, is the miners index. The line at approximately 500 is of the utmost importance. If we fly above it, my beloved analog may be damaged beyond repair.
As long as I'm throwing crucial lines of resistance at you, the descending trendline for the gold and silver index likewise merits attention when the 12:30 (EST) FOMC announcement hits the wires and the algos.
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Although I think bonds are very vulnerable to a sell-off, I'm not touching them. Bonds can be a strange beast, so I'm going to focus on equities, where I'm more comfortable. If we break the horizontal line I've drawn, look out below.
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