In the market Monday we saw a unique event take place. From the opening bell the market started falling and by 11 AM C.S.T. the S&P had sliced through all the key support levels that it had closed at Friday afternoon. The market was moments from a freefall when the Fed turned on what is obviously a brand new algorithm buying program that made the intraday VIX (volatility index) meter shake in four-point spikes every few minutes the rest of the day. Big sell orders continued coming through causing the VIX to spike repeatedly but the Fed's program bought the sell orders relentlessly pulling the VIX back down as fast as it went up. This happened continuously through the rest of the day as can be seen in the chart below.
click on image to enlarge
The fierce battle stopped at the bell with the S&P downtrending into the bell. This "line drawn in the sand" battle is easy to see but the question is, who won? With the S&P drifting down into the bell, you might think that the sellers won but just as soon as the market closed they came in and bought the SPY back up fifty-cents quickly. The S&P futures are well into the green in the early evening hours Monday night. It's ridiculous that such a conflict took place with an unclear winner but that is where we are at.
To throw a wild card into the situation Yellen's speech is Tuesday and Wednesday and she always turns the buying program on during her speech days to prep the market with the desired reaction to the Fed speech. With the speech coming, the next move in the market may be muddled by the two-day event where little trading takes place and then normal trading resumes Thursday. This is a very frustrating situation for investors who are trying to figure out if they will pump the market one more time before year end to give the traditional Santa rally at least to some degree or if there will be more selling to come soon.
The charts below show the key levels that the S&P fell through on Monday. I discussed the situation in each of these charts in detail in my article this morning on Investing.com under Opinions / Analysis / Stock Markets.
Trade well my friends,