Key Charts To Watch For The FOMC

Retail investors believe that President Trump and his policies are a good reason to invest in stocks, again. Money flowed into stock funds and ETFs in the last week, surpassing the prior record that was set just after the 2016 presidential election. Investor sentiment is high. AAII showed bulls gaiined by more than +10 percent last week, but the equity indices weren't able to make gains in the approach to the FOMC interest rate decision today, which is expected to result in a raise. A key technical formation that led to some of the recent weakness in equities was a negative break out of this triangle formation in the DJIA. 

The technology sector has been on the defensive due to potential trade wars, Trump tweets. and problems in Facebook, Inc FB, which had its first settle below its 200 day moving average since early January 2017.

QQQ held its initial key Fibonacci retracement support exactly on Monday. A clean break here would likely see continued downside momentum until 159.70. Initial resistance at 169.29 

ESM8 (E-Mini S&P future: CME) held initial support area several times yesterday in choppy trade ahead of the FOMC decision today. A break of 2712 would likely see more downside momentum. We like to use .786 retracements for potential reversal levels and it worked well in ESM last week. 

Volatility has been firm after the VIX April future held on to a .786 support area. A move above 18.50 would likely see further upside momentum which would be trouble for the equity indices.

The passive investment crowd may be vulnerable due to speculation over the likelihood of higher interest rates and what Fed Chairman Powell says about the potential pace of further increases. This chart is long 30 year future (USM8) and long ESM8. it has been able to lif after breaking below the year-long trend channel in early February, but it's rolling over at hitting a key Fibonacci .618 retracement last week. A clean break of this short term trend line would likely see both long bond and S&P move lower again.

The five-year future contract has been holding a key long term Fibonacci retracement support. A break of this level today would open up for renewed downside momentum. How fast FVM8 moves below this level will be important after the FOMC. The long bond future (USM8) turned lower last week after testing the vwap of the year. The 200 week moving average above at 146’28 is a major resistance area. It broke this long term key in early February, which weighed on the equity indices. Initial support today is at 143’12, 142’29, 142’08*. Negative today below 143’27*

Copper has been our least favorite of the asset classes in the last week using relative value analysis. The May Copper futures contract (CPK8) — charted as the rolling actively traded contract — is nearing its 200dma, which has been a pivotal support. A break of this level today would add to weakness in copper and related stocks. 

Silver tends to lead Gold directionally, and May Silver (SIK8) is testing a pivotal support level. If this holds, it would lead Gold's initial key resistance in April contract at 1323 (GCJ8). There is potential momentum above this level, but the dollar is key. A strong dollar would be a negative for gold. 

The spot US dollar index has been choppy this year. For now the dollar remains mostly negative below 91.000.  

David Wienke is the editor of Keystone Charts. More than 30 years of experience providing technical analysis and execution services to institutional clients is now provided in a daily newsletter, The Daily Game Plan. Coverage includes equities, rates, currencies, and commodities. Dave is also an introducing broker with Capital Trading Group, LLLP (CTG); a Chicago based investment firm specializing in execution and account management for CTAs and individual investors. Charts are created using CQG, a top of the line trading and charting service. For a free trial of the Daily Game Plan newsletter email me at dave@keystonecharts.net or go to Capital Trading Group to subscribe. 

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