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S&P Breaks Out In Asia, Pulls Back in Europe – Stock Market Trading Setup for Thursday February 6, 2020

Quiet morning here in Yurrop. S&P futures are up a mere dozen points, coming down from up 25. Nadsac fucutures are only up 30 some, off highs of up 60 some.

Today’s media raison du jour? China cuts tariffs on US goods thanks to Cornohaha Virus. See, it’s all good. Death? Bullish. Pandemic? Bullish. Central bank money pumping (wink wink shhhhh…), definitely bullish.

Liquidity moves markets!

Follow the money. Find the profits! 

Over on the Shag High in China, the spike off the trend support low continues. The gap breakdown is now 2/3 filled. But 2866 is a resistance area. Normally, we’d expect a pullback to test the low before a sustained rally from here. If I had to guess, I’d say first they’ll push it toward the busted uptrend line at 2925. Then we’ll see.

China Stock Market Chart

Notice that I said “normally.” But there’s no such thing as normal any more. Only Chairman Mao knows how much money the “People’s” Bank of China can pump into the market to keep it at least semiflated. [New word ©Wall Street Examiner. You like? If yes, send donation. Cash only. Small bills.] Meanwhile, over on the US side of the world, the Fed is pumping $100 billion a month into the market and it isn’t even breathing hard. 


Meanwhile, to catch up on how this nonsense started off this week, click here.

Now to redundantly re-emphasize, “The important thing from the perspective of those trading the US, if China doesn’t break, then Wall Street can keep partying on.”

Meanwhile, back on Wall Street, having traded higher yesterday on the Cornohaha Virus cure, the S&P fucutures (ES) are again higher as of 5:00 AM in Noo Yawk. But second thoughts began to creep in as European institutional traders finished their morning coffee, before their mid morning coffee break. Not to mention their lunch break, and afternoon tea. Then drinks at 5, and back to work from 7 till 8, then head out for dinner.

This is why I love spending so much time over here. They got their priorities straight. Eat, drink, recreate, and procreate. Oh yeah, squeeze in a little work here and there.

Meanwhile, below is a daily bar chart of the ES. We have an ever so slight breakout on the futures. Looks like they need to get above 3345 or so to make it stick. Then the target would be 3400.

S&P Futures Chart

Below is the S&P index (cash) hourly chart. That little green oval at the far right is where the futures have been trading this morning. Can you say breakout? Ah, but nay, it is not where the futures trade in Europe that counts. What happens in Europe, stays in Europe. It’s where Wall Street ends the day that matters.

Of course if you are a day trader, Europe matters.

On the hourly chart of the cash index, the S&P would need to clear 3338 convincingly for a breakout. The green circle at the far right shows where the futures have traded overnight. That suggests that New York will open above the line. But will it stick?

Yesterday near the close I calculated and posted at that the 5 day cycle projection was 3365-70. The 3 day cycle projection looked like 3355 at the close. So, yes, I think that they’ll go higher.

But there’s a little negative divergence in the 5 day cycle oscillator. So if they don’t gap and go this morning, they’d be vulnerable first to around 3330, then 3320. But the odds still favor the upside.

That’s my best take on the intraday stuff. 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! 

Meanwhile, since you may not be familiar with what I do in my spare time (sarc alert), I’m reposting yesterday’s chart and comments on the Fed Feed to Primary Dealers.

Lots of parallel tracks. But hey, correlation doesn’t prove causation. Sure it doesn’t bwahaha. Typical economist bullshit. Sometimes correlation and a little common sense does demonstrate causality.

Fed Not QE

I update this chart with complete analysis 6-7 times monthly in real time over at Liquidity Trader. If you’ve never subscribed before, you can try the service risk free for 90 days.



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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. 

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