QE3 Trade Pattern Confirmed

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK (TheLFB-Forex) -- Wall Street equity trade has suffered six sessions of negative trade, which is something not seen since Feb.13, 2009. Seeing five consecutive red sessions has not happened since Aug. 2010, which reveals the power of the Federal Reserve's policy to ramp markets higher and create a feel-good factor. It has to be noted that ramped-up markets crash hard when real players start to sell, and that very few investors have enjoyed a feel-good factor, while watching 12 years of S&P 500 (1282) slog that has values back to 1275.

The downturn in overall equity sentiment, and the reversal in S&P 500 valuations off 1350 resistance, potentially on the way to yearly lows, is timed to perfection for those looking for drip-fed assistance from the money-printing Federal Reserve. This is a similar pattern of trade that pre-empted the launch of quantitative easing programs previously. It may be hard for market manipulators to get equity indices valuations much higher than their current levels in the mid-term.

Trade signals and market alerts sent to clients last week that highlighted S&P 500 (1282) reversing from 1340 have followed through, as have the signals to sell SPY (128.40) from 132.50. There are no indications at the moment that either of these signals are close to reversing their negative technical outlook.

Outlook:

The potential for new trade signals to form looks strong, and most trade signals will be continuations of last week's set-ups that have held their short bias. Momentum, sentiment, price action, and participation, all continue to favor the short side of trade. Trade signals will be issued once Wall Street markets confirm that the tone of negative global trade will be continued. S&P 500 trade has major support at 1275 which is likely to be a difficult price point to easily break lower from.

Exchange-Traded Fund:

SPY(SPY) , the exchange-traded fund (ETF) that tracks S&P 500 momentum looks set to continue its short near-term trading pattern, in-line with global equity trade that is generating increasing daily volatility. Last week's client notes highlighted that there was very little support if 131.00 broke on SPY, which has drawn in targets of 129.50 and 127.50.