The explosive move I guessed about in the last post commenced "within hours" as expected. In fact, it began within one hour of my post instead of post-Fed as I had supposed. I am now of the mind that our mid-term rally is under way. However, there is still no need to go chasing it at this point. First, if today's rally is, indeed, the start of a multi-month move higher, the initial impulse move is going to have to be consolidated. Therefore, I will wait until the first pullback to decide whether to get aggressively long. If the pullback takes a consolidative form, it will be begging for attention from the long side. Second, if the mid-term rally has begun, it's got at least another couple hundred SPX points left under its belt based on the size of today's move.
Now I'm going to warn you about the giant curveball such a rally will throw us. During the course of the next several months, the markets will lure the eternal optimists back into the game in a heavy way. There will be a general feeling that the government's maneuvers have saved the day. The vacuous talking heads on TV will convince themselves that the bull market has returned, much like it did after the LTCM debacle. To call this period the eye of the storm is more than an overused cliche... it is quite an appropriate metaphor.
The other side of the eye will be ugly. There will be no dramatic crash as we just witnessed. At some point we will see some heavy selling, and the vacuous heads will call it a pullback. It will continue into more selling, and they will call it a "healthy" correction. A small bounce and more heavy selling, and they will start calling the bottom. And so on. The steady erosion of prices will simply continue day after day, never allowing those who are waiting for a rally to get out. It will be ugly.
Apologies for not having any pretty pictures to view. Preparing charts is just not as easy to do on a laptop as it is back at my home station. I'll make it up to everyone with a full review this weekend....