|SPY June 19 2013|
The market was setting up pretty nicely for a resumption of the uptrend. The Fed announcement was exactly as what would be expected, nothing new, no wording about ending Quantitative Easing.
Then Ben Bernanke stepped before the cameras for his news conference, a relatively new invention of the past few years for a Fed Chairman. The markets were calm for a Fed announcement, and roughly where they were before the announcement.
Looking nervous and speaking in his familiar staccato delivery, the Fed Chairman said that he expected the Fed to begin tapering by the end of the year and for QE to end by the middle of next year.
That was all the market had to hear. It started heading lower and didn't look back. At day's end, it came to rest around the usual support level of 1620. The bond market saw interest rates shoot higher.
It's not really fair to blame Bernanke. QE has to end at some point, and they might as well be open about it. They've been dropping hints for weeks. This was the first clear word on the matter, though.
Having stopped around the 30-day moving average in its fall, we fully expect SPY to make another test of the 1600 level in coming days, perhaps tomorrow. If that holds yet again - a very, very big "if" - we expect a fairly dull summer spent in the 1600s. The next most likely scenario is a technical bounce back to the 1630s.
As a trading tip, trying to trade the type of volatility we saw today was a sheer gamble. If you did so and made money, terrific, but it requires more luck than usual. A wise move was simply to avoid the whole thing.