QE3 A Certainty? - August 31, 2011

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About 30 minutes before the close yesterday, the intraday 20 DMF was up by more than 180%, a large players’ buying mood that completely evaporated into the close as the 20 DMF finished almost flat for the day. The most disturbing to me is that large players backed off after the release of the Fed’s minutes as soon as GS told clients that QE3 is now a “certainty” and JPM told it was now “most probable”. A clue that QE3 might not be so much appreciated by deep pockets institutional players may have been offered here.

This also tells you how important it is to wait for the close before the robot can evaluate the statistics for the next day. Make sure to read Pascal’s IWM robot comment. With a neutral signal today so close to issue a “back in cash” signal, I will not make a long commentary on the multi-pivots since the picture is almost unchanged from yesterday.

The trailing stop was raised again to 66.93. If the IWM recent outperformance let it sit above a very strong support cluster and below a weak resistance cluster, we have a reverse outlook for QQQ and a neutral one for SPY. After Monday’s short squeeze and Tuesday’s final window-dressing cosmetics tactics, I expect today to be a quiet day. Starting tomorrow, big gaps up or down and trending days might become the norm once again with renewed focus on employment reports.

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For the GDX robot, independently of the neutral signal, we are still watching for a higher high than 64.05 to confirm a successful uptrend launched from QR1 and SR1 (62.12).
Billy
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