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Surprise (Not) Rocket Launch from Support – Stock Market Trading Setup for Tuesday February 4

S&P futures are bonering. They hit support yesterday, and surprise, surprise, the dip buyers were out in force. Well, not a surprise actually if you recognize that the Fed pumping $100 billion a month into dealer trading accounts permanently tilts the playing field. Doesn’t mean that the market can’t go down, just that it probably won’t stay down for long.

The raison du jour for the rally is now Coronavirus Containment. Before it was trade war hopes and fears. Now coronavirus has taken center stage. More people die from gun violence in the US in a day than coronavirus has killed, but hey, let’s make it the cause of stock market panics. In both directions.

Liquidity moves markets!

Follow the money. Find the profits! 

So, time for a little 4:30 AM NY time perspective again. Let’s look at the weekly bar chart of the Shanghai Composite. Yes, that little green bar on the far right, way down below the rest of the bars is bouncing.

China Stock Market Chart

Meanwhile, back on Wall Street, the S&P fucutures (ES) looked like this at 4:30 AM Noo Yawk Toime.

S&P 500 Futures Chart

Are we surprised that the 50 day moving average and the prior support level generated a huge bounce? No, we are not. That support showed up in my proprietary measures as well in my weekend report in Liquidity Trader. I had warned that a bounce was in order.

It has followed through overnight in Asia and Europe. But the ES is back to trend resistance at 3282. This is obviously an inflection point. It should pull back from here, but momentum suggests more upside. The next minor resistance level on the ES would be 3292.

Here’s the S&P index, hourly chart. The futures are currently trading where that little white circle is on the right. The downtrend is broken on the hourly. But the current price is right at the level of Thursday’s high. If New York opens at or below this level and pulls back, then the 5 day cycle projection would only be 3282 and this phase of the pop would be over.

If they hold 3282 and start to move higher, then the target would be 3294. And if that’s cleared, look for 3306.

S&P 500 Chart

That’s how things look from Europe, currently Zadar, Croatia, in the wee hours of US Eastern time. Good luck today! For the big picture, and my tactical recommendations, see the weekly Technical Trader report.

What You Should Do With “On One Hand, On the Other”

There’s a lot of that infuriating, “On the one hand–On the other hand,” stuff in today’s report. On the one hand, I hate when that happens. On the other hand, it is what it is.

But the good thing is that there are clear parameters that should tell us what to expect as the week begins.

Technical Trader subscribers, click here to download the report.

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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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