As expected, the Fed raise the short term interest rate on Wednesday, and then triggered massive buy programs in order to rally the stock market thus created a positive response to their policy action.
But the impact of the Fed buy programs is likely to be short-live as US$ tanked after the FOMC decision was released, which can then begin to trigger an exodus capital away from US dollar assets including the US stocks.
A cascade of selling in the stock market could start to overwhelm the Fed buy programs and trigger the beginning of a big stock market collapse that could happen very soon.
Raising interest rate into a weakening economy plus the debt ceiling crisis could trigger a massive selloff in the stock market as international capital flee the US stock market and going into precious metals and commodities.
A typical first down leg (wave 1) of a stock market decline is usually about 25% of the value, that implies a 5,000 points decline in the Dow, a 1,350 point decline the Nasdaq 100 and a 600 points decline in the S&P 500.
On the short term intraday timeframe, key price level for NQ on Thursday will be 5400.
-- Some shorts may have to cover if NQ remains above 5400 in the morning on Thursday.
-- Should NQ opens below 5400 in the morning on Thursday, and remains below 5400 in the morning, selling may come in to sell the market. If so the first support is at 5380 then 5365.
