Market Watch September 22, 2012

The market made a new high a week ago than pulled back just a bit.  So let's take a look at what the charts are telling us to gain some perspective on what the near term holds.  Below is a 60 minute chart of the S&P 500 fund (SPY).

From the chart above.  The 60 minute is in a neutral pattern neither overbought or oversold, just trending sideways at or above the moving averages.

The daily chart is overbought and can use some consolidation or a pullback to the 20 day exponential moving average prior to moving higher.

The weekly chart above, has just entered into overbought territory.  Prior to moving higher, I would expect to see some sideways to a small pullback. 

Bottom Line:  Charts are showing some overbought signals, so I expect next week we remain in a trading range to work off those conditions prior to resuming the predominant trend, which is higher.  Thank you for reading.
 

Fed Pumps More Liquidity With QE3

Just to show how slow the economy is recovering, the federal reserve announced on Thursday the release of QE3 (quantitative easing three).  Under QE3 the government will purchase up to 40 billion dollars of mortgage backed securities per month
I want to focus on how the overall market and some specific commodity related assets have already appreciated this year to date.  Below is a chart of the S&P 500 (SPY).

This ETF is already up 18% for the year.  This chart has the look of some extreme front running the QE3 announcement.  The chart is extremely over bought on the daily chart. 

The chart above is the price of oil / barrel.  Notice that this is the highest price per barrel at 96.25 that a QE program has been initiated.  

Above is a chart of food commodities which include soybeans up 44% year to date, wheat up 41%, and corn up 21%.  Perhaps more QE front running has occurred within this soft commodity sector as well.  

Bottom Line:  Just about all markets have been priced extremely high.  If this was a telegraphed call that many traders have made in front of the QE announcement, than we should get a good pullback from today's prices.  The stock market and some commodity sectors are being priced at extremely high risk levels. Thank you for reading.