Most market participants considered QE3 a game changer. With the Fed printing
money forever, the bullish crowd somehow determined that nothing could go wrong.
Ooops!! Someone yelled "breakout" as the SP500 moved to new cyclical highs,
but it appears what they meant to say was "get out" leaving investors to wonder
if the announcement of QE3 has led to a bull trap. See figure 1 a weekly chart
of the SP500.
The breakout above the rising trend line is easy to see, and this breakout
appears to be turning into this week's fake out as prices fall back into the
trend channel. Failing breakouts are never good. I would look for support at
SP500 1408. As
stated two weeks ago: "Breakouts also imply game changer as well as prices
have moved into new, uncharted territory. A break out must "stick". In other
words, if this turns into a failed breakout, then it is look out below especially
since the Fed has been taken out of the picture. After all, it is not like
investors will be asking for more QE anytime soon. "
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