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Ambiguity? Deal With It!

Stock Market Trading Setup for Friday, February 14, 2020

Hourly ES S&P 500 Futures Chart

Setups don’t get much more ambiguous, and fraught with 2 way potential, than this. OK, it’s more upside than downside potential today. An upside breakout through 3390 would target 3415.

A break of 3372, on the other hand, would only have room to about 3363 before reaching trend support. If that broke, now you’d be talking. Room to run down to 3330 or so.

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These short term oscillators are giving no hint whatsoever yet which way the break will be. Bulls get the benefit of the doubt until proven otherwise. Something I heard about, “The trend is your friend.” True until it isn’t. Right now it still is.

ES Futures Hourly Chart

China Stock Market Overnight

Over in China, they went right back to work on the upside after a single down day in 9 days. It’s pretty impressive how the “People’s” Bank of China rigs that market. They’re almost as good as the Federal Reserve.

More open about it for sure. At least China’s central bank ain’t shuckin’ and jivin’ all the time like the Fed does. God it’s embarrassing watching these Fed mouthpieces come on the CNBC and lie like a rug all the time. Who are they kidding?

So the Shag High continues to challenge the line formerly known as uptrend. The Fed may be king, but the PBoC is still the Prince of Prints.

China Stock Market Chart

This classic Return to the Scene of the Crime (support break) pattern, happens a lot.

This is also an ambiguous setup. A rollover here should lead to a dramatic drop toward a retest of the low. Conversely, a holding action near the trendline should lead to a renewal of teh rally, heading for 3100.

S&P Futures Daily Chart

Back in New York, we’re in the fourth day of being rangebound on the daily chart of the US fucutures.  They’re at or slightly above the upper bound of the range as I write at 7:50 AM ET.

Either a pullback or consolidation is due. The range is the Magic 8 Ball. It knows all and tells all, but only when it breaks. The parameters to watch are 3389 topside. The first target above that would be 3412 on the ES.

3384 is the number to watch on the downside. The firs target would be the longer trend centerline at roughly 3335. S&P Futures Chart
Yes, I see the wedge, and I don’t care. They break upward as often as the break down. And I don’t think the oscillators tell us much either. Sometimes you just have to accept the ambiguity and deal with it.

DEAL WITH IT! OK! Negative divergences are the most common phenomenon in technical charting. They are great. After the fact. Other than that, useless for timing purposes. I’ll take good old support and resistance level analysis any time.

S&P Cash Index Hourly Chart

The green oval at the far right is where the futures have been trading this morning. This negative divergence looks a little pregnant.

We’re really due for a down day to close out the 5 day cycle but right now they’re above trend resistane around 3385, and could be headed for the sharp uptrend line at 3396. There’s an unmet 5 day cycle projection of 3394.

Odds are that they’ll make that, and then pull back. The support cluster at 3380-85 would then be critical if that happens. If it holds, then up, and away. If it breaks, there are still trendlines and pivot levels that mark support every few points. Then there’s a little air, not much, below 3370.

S&P 500 Hourly Chart

“And that’s the way it is, Friday, February 14, 2020.” 

From Zadar, Croatia, good morning!  

Where have you gone Walter Cronkite? Our nation turns its lonely eyes to you.

Meanwhile, for the big picture on weekly and monthly swings, and the long term, plus my tactical recommendations, see the weekly Technical Trader report. Try it risk free for 90 days! 

WIth the Monthly Treasury Statement just posted, I’ll be posting my regular monthly report on the implications of that data on Fed policy over at Liquidity Trader. Here’s a link to my latest on the Fed balance sheet, or Fed BS for short.

Not QE? The Financial Times Is Either Stupid or Lying

The pause in the growth of the Fed’s balance sheet over the past 6 weeks isn’t what the pundits are telling you. Some are saying that it’s evidence that the Fed is not doing QE. They’re either gaslighting, or clueless. But we know what it is, and we know what happens now.

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Lee Adler

I’ve been publishing The Wall Street Examiner and its predecessor since October 2000. I also publish LiquidityTrader.com, and was lead analyst for Sure Money Investor, of blessed memory. I developed David Stockman's Contra Corner for Mr. Stockman. I’ve had a wide variety of finance related jobs since 1972, including a stint on Wall Street in both sales, analytical, and trading capacities. Prior to starting the Wall Street Examiner I was a commercial real estate appraiser in Florida for 15 years. I was considered an expert in the analysis of failed properties that ended up in the hands of bank REO divisions, the FDIC, and the RTC. Remember those guys? I also worked in the residential mortgage and real estate businesses in parts of the 1970s and 80s. I have been charting stocks and markets and doing analytical work since I was a teenager. I'm not some Ivory Tower academic, Wall Street guy. My perspective comes from having my boots on the ground and in the trenches, as a real estate broker, mortgage broker, trader, account rep, and analyst. I've watched most of the games these Wall Street wiseguys play from right up close. I know the drill from my 55 years of paying attention. And I'm happy to share that experience with you, right here. 

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