Chicagostock Trading

Chicagostock Trading

SP500's ride from 1800 to 2040 with Chicagostock

HOW DID THIS:

 

GET TO THIS?:

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How Oil Ripped the Face off Shorts

Let's take a look at how the oil short squeeze took place.  In February, oil broke the January low of 2756, falling to 2605 on February 11th.  Just as oil was testing and ready to break 26, the UAE Energy minister came out with remarks that they were willing to cooperate on production cuts.  This instantly reversed the market off the lows to see it recover 30 in the coming days.  Dubbing this the "OPEC put" as it clearly showed members of the organization were attempting to defend 26.  

The move, setup a failed breakdown, leaving shorts below 30 trapped:

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The Great Reset

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In December’s article “The Yellen that Stole Christmas”, the point was to show how buyers in the SP500 were caught above 2040, and needed a Yellen rescue.  The market attempted to breakout to start December, however the rug was pulled from underneath as Yellen reiterated a rate hike later in the month.  After bluffing the market for 2 years on this rate cut, the call fell on many deaf ears.  So it was. Buyers were left caught at higher prices, betting on a “Santa Claus Rally” only to be hoping for Yellen to save Christmas.  For the first time in 6 years and exactly 3 years from December 2012’s FOMC that placed a 6.5% target on NFP for a decision on Fed Funds rate, the FOMC reset the market and hiked the Fed Funds rate by a quarter point.  Bulls did not get what they were looking for and saw the market fall back to retest 1982 support.  The level barely held on December 18th, as the market rallied back for Christmas holiday and the “Santa Claus Rally” was actually a gift from Yellen for stuck longs above 2040 to “breakeven”, or as we like to call it “get out of jail free card”.  

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The Yellen that Stole Christmas

 

When the FOMC decided to place a 6.5% target on NFP rates to justify raising the federal funds rate, the SP500 was trading 1427, gold 1718, US dollar 7985, and 30 year bonds at 148.  

“… the Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent…” (FOMC 12/12/12 source).

Just days after this release, we highlighted the weakness in gold: Whats With Gold? FOMC Spooks Market. Double Top Eyes 1250.

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Pre-FOMC Market Update

 

 

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