Shallow Thoughts
The Fed has spent at least 20 years preserving, protecting, and defending, not to mention enabling, supporting, promoting, moral hazard with free money and ever bigger bailouts. Some would argue it’s 107 years. Now it has engineered the mother of all bailouts. It is injecting a half trillion dollars a week directly into the accounts of the Primary Dealers. It has engineered an alphabet soup of bailouts for bonds, stocks, money market funds, commercial paper, and commercial real estate.
The Fed is bailing out commercial real estate whores for god’s sake. Pigs like the biggest pig of them all, You Know Who.
What can ever bigger bailouts lead to? They can only lead to ever larger crises. Is this the one they can’t recover from?
Is this the one that buries everybody under mountains of central bank promises that can’t be kept by bank depositors and taxpayers? Because ultimately that’s who’s on the hook.
Today’s trading setup is below. Follow my Deeper Thoughts, with tips on how to preserve, protect, and defend your investment and trading capital, at Liquidity Trader.
Market Trading Setup for Thursday, March 26, 2020
Hourly ES S&P 500 Futures Chart
2425 was the Maginot Line on the hourly chart this morning. Wikipedia it if you are puzzled.
The point is that the French built an impregnable defense. So the Germans just went around it. That’s what the bears did 45 minutes ago. It was a line that had supported 4 prior hourly lows. It’s now in the rear view mirror.
At 8:10 AM in New York, the fucutures were threatening another support line at 2410. 2385 is the mother of all intraday support levels here. If the bears retake that, a half trillion in Fed money will have been vaporized in the space of a couple of days.
LATE BULLETIN 9:00 AM- Futures have rebounded back into channel. False breakdown! Bullish. Bull troops have arrived! The battle is joined. Centerline resistance 2485.
Even I, as a moralistic shouting at the moon lunatic, preaching retribution for the sins of the monetary/economic priesthood, fear for what would happen next. I mean, I’m thinking shit like interruption of the food supply chains. Scary, lunatic fringe stuff that has become all too real a possibility.
But in the meantime, let’s trade this sucker. The moves are huge, but the chart patterns are ordinary. Take away the numbers, and they charts look absolutely mundane.
If 2410 or 2385 holds, the market will attempt to crawl higher, but now there are obstacles at every level, and hourly momentum and cycle indicators tuned to a 3-5 day frequency look like shit. I’d have to bet on a breakdown here. Ideally the 5 day low would be due tomorrow. Could it be today? Sure. But I would wait until I saw the whites of its eyes.
Reminder- I’m only talking patterns for a day here. This is not the big picture. If you want that story, you must subscribe. Risk free trial and all.
S&P Futures Daily Chart
The ES is now trading below the centerline of its 4 day uptrend channel. The rally was stymied twice at the centerline of the original crash channel coming off the market top. It would need to clear 2500 to break that centerline and head for the top of the channel now at 2660.
But at the moment, it’s headed the other way, below the centerline of the 4 day uptrend channel. It could drop to 2350 today and still be in the channel. That’s critical support on the daily chart. 2385-90 is possible minor support on this chart also.
Resistance is at 2495 and 2550. The trend centerline is around 2490. If cleared then the market should head for the top of the channel, now at 2560 or so.
Right now it’s headed down while momentum and MACD tuned to an 8 week cycle frequency are on buy signals. They are at extremely weak levels. Both direction and absolute level are important in trend and cycle analysis. I wouldn’t get too excited about buy signals buried at historically low absolute levels.
Again, this is for the perspective of one day only. The purpose of these reports is not to divine the longer term. If you want longer horizons, join me at Liquidity Trader.
Department of Wash, Rinse Repeat – There’s no oversold parameter in a crash. Positive divergences are almost certainly necessary to form a good swing low. There are no positive divergences on the daily chart yet.
S&P Cash Index Hourly Chart
The red bar at the far right shows where the futures have been trading overnight. It is well below the uptrend channel on the hourly chart of the regular trading hours cash S&P.
The 5 day cycle oscillator went to the sell side in the last hour of regular trading yesterday. A downtrend channel hasn’t been established yet. Minor support levels are around 2360 and 2310. If those break, the low should be tested.
There’s no 5 day cycle projection yet, but the 3 day cycle projection, not shown here, was 2375 at the bell yesterday. If they don’t pop up in the early going, the 5 day cycle projection will be worse than that, maybe 2250.
Join me on the Capitalstool.com message board today and I will update you there occasionally during the day. Feel free to join the “fun.”
“And that’s the way it is, Thursday, March 26, 2020.”
From earthquake rattled, coronavirus locked-in Zagreb, Croatia, good morning!
Where have you gone Walter Cronkite? Our nation turns its lonely eyes to you.
Meanwhile, here are the latest reports from Liquidity Trader.
On March 3, the Fed converted Not QE into Panic QE. Since then it has pumped $766 billion in cash into Primary Dealer accounts. At the same time the US Treasury issued “only” $147 billion in new debt. So in essence, the Fed issued $619 billion in excess cash.
Other than the hyperinflationary implications, what good has it done? What does it mean for us looking ahead.
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Is Gold Forming A Base
It looks that way, but it’s not out of the woods. The same goes for the mining stocks. This report shows what needs to happen.
This market is a different breed of cat. Cycles have little or no influence. This is a fundamental collapse of liquidity. Traditional technical analysis is more useful. In that regard, the conventional measured move implication of the breakdown below the December 2018 low is 1350. Other techniques point to that area.
I’ve added a few new shorts to our trades list this week. Our initial pick now has a gain of 32.6% since entry on March 3, using no leverage. Short sale margin is 50%. You can do the math.
Technical Trader subscribers, click here to download the report.
Not a subscriber? Try Lee Adler’s Technical Trader risk free for 90 days!
The Fed has undertaken so many rescue programs since Friday that my head is spinning. It’s hard to keep track of it all. A schedule of repo offerings for the next month reads like the Old Testament. Even the rabbis are arguing over it, the underlying question being, “Where is G-d already?”
I’ve tacked it to the butt of this report.
Anyway, it’s irrelevant. The dealers can’t borrow a fraction of what the Fed is offering. Here’s what’s relevant. The markets are now a mass grave filled not with COVID19 victims, but victims of the greatest bubble in history. A bubble built by the Fed.
Here’s what’s coming next, and what you can do about it to preserve your capital and maybe even profit from the big moves that lie ahead. Assuming that trading systems continue to function at all.
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Even before COVID-19 the trend was clear that the Treasury would need to keep borrowing money hand over fist. Now the deficit will explode. This is a hideous problem for financial markets in this condition.
Subscribers, click here to download the report.
Get this report and access to past reports. Read Lee Adler’s Liquidity Trader risk free for 90 days!
And now, a note from the church rector:
Good Morning!
Twitter has banned me for using bad words (moi? 😱) 😄. I had tweeted an emotional criticism of a so-called financial news outlet of Newscorp/Dow Jones.
Banning me for throwing a few cuss words at Rupert Murdoch’s propaganda minions is like banning David for slinging a rock at Goliath. Only I didn’t kill anybody. Besides, they’re impervious to rocks or reason.
But alas, Twitter’s playground monitors stomped their feet and pouted, “Take it back, or we won’t let you play!”
But they also said that, instead of taking it back, I could formally appeal.
I’ll never retract the truth, so I took the second option. My appeal went like this, in the immortal words so often heard from a street kid from Philly: “Stick it up your ass!”
Good bye Twitter. I never believed in you anyway.
So if you like this post or anything else you see on Wall Street Examiner, please give it a link on your favorite financial social media site, with my thanks! And please join us at our own little social media playground, Capitalstool.com for my occasional intraday blurtouts. You can add your very own blurts too. – Lee
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