Combined with a QE unwind increase to 20B$/month starting in January, 2018 looks rather bearish in terms of liquidity.
However, we are now close to reaching the Santa season. Below is a re-post of the table that shows how the markets have reacted after December 14, depending on the gains at the close of December 14.
Today is December 14. The above table tells us that if the S&P500 closes below 2647.58 tonight, then we should buy the drop with both hands. However, if the S&P500 stays above that level at the close of tonight, there is a 50/50 chance that it will close either higher or lower by December 31.
Of course, in previous years, there was no dramatic tax deal vote hanging over the markets. Hence, this time might be different.
For now, there are quite a few negative aspects in this market:
After the Fed announcement, the general market did OK, although the Cumulative Tick was negative and the 20DMF showed strong selling in the final minutes.
The financial sector was sold hard yesterday. This is strange in a higher rate environment. Probably a sell-the-news type of action.
Yen, Euro, US$ and the 10 Year Treasuries also moved counter-intuitively to the rate increase. This looks more like a position adjustment rather than a trend change.
Index investors are not giving up (SPY still UP, although investors are not chasing the QQQ higher.)
On a side story, oil looks rather bearish.
Conclusions:
This market hangs on the tax deal to be voted before the end of the Year. Then 2018 should feel more heavy.
