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Ewww!!! What’s That Red Stuff?

Stock Market Trading Setup for Thursday February 13, 2020

I have been beset with brainfarts lately. Must be old age settin in. Bad enough when you let em loose in the sofa cushions, but in headlines on your own website? Ohgawd, how embarrassing!

Did I get the date right in the headline today? I have since fixed yesterday’s post. But once it’s out there, everybody knows who did it. It was Grandpa again.

Liquidity moves markets!

Follow the money. Find the profits! 

However, I did get a few things right yesterday, such as “The hourly chart of the ES futures suggest that a push to 3375 is in order. Then we roll over.  Then the question is how far.”

This morning, so far, so good.  The pullback has come to the centerline of the short term channel. That centerline is at 3352.

The market “should” now bounce. What the market “should” do from a technical perspective, it only does about 70% of the time. Ornery bastard. If it doesn’t, it could head for the lower channel bound at 3322 in a NY second. 

If it bounces, if I were a bear (ahem), I’d hope for a lower right shoulder in this pattern.

Meanwhile, momentum and cycle indicators are pregnant. With bull or bear, we don’t know. A weak bounce, or a mornning move below 3352 would call for bear.

ES Futures Hourly Chart

Over in China, Good Gawd Y’all. We finally had a down day. Praise the Lawd and pass the Twice Cooked Beef.

Notice, it filled almost all of the gap, but left a teensy weensy bit open. And note where it stopped. Right at the busted uptrend line. What a surprise! Not.

China Stock Market Chart

We actually foresaw this in the oracles back on Gapday. Sometimes TA works — even the simple stuff, like drawing a straight line between two points. This classic Return to the Scene of the Crime (support break) pattern, happens a lot.

That said, this is still really 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.

Meanwhile, back in New York, the daily chart of the US fucutures shows a tiny pullback that has slightly violated the short term uptrend channel. They are flirting with disaster here. If they break this, the S&P could fall all the way to, mygawd 3325. Trump will be livid. Powell will have to bend over some more.

S&P Futures Chart

I will say this. The technical oscillators at the bottom of the chart look really, really sick, considering we just saw another all time high. Any downtick from here would be pretty damn bearish, I think.

Below is the S&P index (cash) hourly chart. The green oval at the far right is where the futures have been trading this morning. That’s pretty dramatic. As of 7:45 AM, we’re about in the middle of that sucker.

S&P 500 Hourly Chart

The 5 day cycle oscillator went on a sell signal yesterday. A 2-3 day cycle bounce is in order, but the downside pressure should return at some point today, and into tomorrow. 3352 looks like the key support level. If it breaks, bear party. Farts and all.

If they hold above that we’ll live with ambiguity for as long as the SPX stays rangebound between 3352 and 3380.

“And that’s the way it is, Thursday, February 13, 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.

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Lee Adler

I’ve been publishing The Wall Street Examiner and its predecessor since October 2000. I also publish, 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. 

  3 comments for “Ewww!!! What’s That Red Stuff?

  1. Andrew
    February 13, 2020 at 9:25 am

    Hi Lee,
    You mentioned technical oscillators not being characteristic of stox at new highs. Two of my favorites: The McClellan Oscillator has been negatively divergent since October (+87.71). Yesterday it closed at +38.25. (The January snp high had a McC reading of +54.99.) This has been making lower highs for five months. Yesterday’s 38.25 reading is characteristic of a new snp high in a market that is ready to roll over.
    My other favorite is the percent of NYSE stox above their 40 day moving averages. The January high had 71% above the 40. Yesterday’s high had only 55% above! This is rising from a late January low of 38%, but a strong market with new highs should be around 65% or better. Not 55.

  2. February 14, 2020 at 4:28 am

    Hello Andrew-

    Thanks for your comment, but it confuses me.

    You said, “You mentioned technical oscillators not being characteristic of stox at new highs.”

    I didn’t mention that. Nor would I have. These posts are about the daily setups, not the long term. Perhaps you got me mixed up with someone else you read.

    Many years ago, I came to the conclusion that negative divergences are useless in a bull market, especially on indicators using a 10 day or similar period. Negative divergences often persist for months and months in a bull trend.

    There are usually a series of lower highs in short period indicators as momentum weakens on the way up. How do you know which one will “work?” In my 56 years of charting stocks, I’ve yet to figure that one out.

    Admittedly, the first 5 years I was using point and figure, and the next few, the only oscillator I say was the 10 Day A/D in the weekly Trendline charts at my broker’s office. LOL

  3. February 14, 2020 at 3:36 pm

    This is the problem with even written communication. The writer writes. The reader infers.

    I try not to imply anything beyond what I put in writing. These posts are about the daily setups, not the longer term.

    Please feel free to ask me to clarify anything which isn’t clear. I’m sorry if it looked as though I mean to imply anything about the longer term with my comment. I meant it simply to set context.

    As I write at the end of every post:

    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! 

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