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The digital money printer

Hey Market Pilots,

The last week’s worth of market movement has been intense in both directions and driven based on two different statements from the same person: the Fed chairman, Jerome Powell.

It began on May 12th when Powell said in an interview that the recovery of the economy was going to be longer and more difficult than they originally expected. I am sure most of us were thinking “duh, welcome to the real world.” The markets didn’t like this and sold off hard for nearly two full days.

Interestingly, through my charts and the Moxie Indicator, I was already seeing weakness and the possibility of price rolling over if price broke the support of the 15 minute 50 SMA. It then went to, and subsequently bounced off, the support I had projected: the Hourly 200 SMA.

A few days go by, price generally rebounds, and on the 15th I go long when it proves that it can stay above the 15 minute 50 SMA.

Then on Sunday, May 17th, Jerome Powell was interviewed by 60 minutes. This time he says the Fed can “digitally print money” and “they are willing to do whatever it takes”. His new words send the markets ripping higher as the market can now plan for more money to be infused into the economy and thus the stock market.

Amazing to see the difference in how the market reacts based on words from the same person only days apart. But what is even more amazing is which came first: the technicals, or the words? The chicken or the egg?

In both cases, the technicals were telling me the market wanted to go down and then up. Powell’s comments merely exacerbated the move in each direction. This is a very fascinating coincidence I see often with the market all the time and this occurrence has just been the latest one I can point to. Not to mention the most obvious in such a short period of time. I tend to settle on the idea that the charts gear up for a move, then wait for the right bit of news to spark that move, almost like it has a 6th sense.

Over and Out,

Your Profit Pilot 

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