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Left Shoulder, Head? The Boing Boing Takes a Breather

Shallow Thoughts

Some folks have compared the rally off the lows to the 2009 bottom or the 1974 bottom. This one is like neither of those.

In 2009, the Fed started direct-to-Primary-Dealer QE in March. The market bottomed in March. It was simultaneous. The market responded instantly.

Liquidity moves markets!

Follow the money. Find the profits! 

This time, the Fed started direct-to-Primary-Dealer QE in late September, in massive size. They called it “Not QE.” It did not work.

So 2 weeks ago the Fed went from Not QE, to Panic QE, increasing direct to dealer QE by orders of magnitude. It still didn’t work.

Over the last 5 days, the Fed went crazy, pumping about $350 billion into Primary Dealer accounts. It worked only yesterday. Or maybe worked. We don’t know for sure, yet.

As far as the 1974 bottom, I was there. It did was a conventional double bottom of a tired, old bear. The first bottom was in October 74, successfully tested in December.

The crash in the summer of 74 was a low volume affair, 3-8 points per day on the Dow. Nobody saw it because after 6 years of a secular bear market, nobody cared. The ticker tape barely moved. Total NYSE trading averaged about 4-5 MILLION shares per day. MILLION. Not billion. A block trade was 5000 shares.

I’d lay odds here that this low, if it even was the low of this leg, was just the first of what will be a long grinding bear market.

Wouldn’t it be funny if in a day or two the market averages are 20% off their lows, what will the TV talking heads say? New bull market?

Probably won’t happen.

Today’s trading setup is below. Follow my Deeper Thoughts, which tend to be a bit more well researched and supported, and are therefore often right, at Liquidity Trader.

Market Trading Setup for Wednesday, March 25, 2020

Yesterday’s post.

Hourly ES S&P 500 Futures Chart

The fucutures have broken the 2 day uptrend channel. The pullback came down to minor support at 2390 and held. They’re rallying. The broken uptrend line now at 2450 should be resistance, if they get there.

But if the market breaks 2390, the next target would be a trendline now around 2350. Below that are potential support levels around 2300 and 2275. Then an air pocket to 2175.

Hourly rate of change and MACD tuned to very short term cycle frequencies are on the sell side, but not decisively. The first half of regular trading should be the tell as to whether the market breaks down again or the rally resumes.

ES Futures Hourly Chart

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

There are two uptrend channels on the daily chart. The bottom of the sharpest one is at 2387. If that holds, then a powerful meltup remains in force. Today’s target would then be 2500. 

If it breaks, the first target would be the top of the broken crash channel at 2350 today. There’s a massive support cluster between there and roughly 2325. If that breaks, put your crash helmet back on.

Momentum and MACD tuned to an 8 week cycle frequency are on buy signals but 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.

S&P ES Futures Chart

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 broke the uptrend channel on the hourly chart of the cash market in regular trading hours.

However, at the 9:00 AM price it’s right on the bottom of that channel at approximately 2420 cash. That’s the level to key on in the first hour of trading. If it holds, the SPX should head back toward 2500 quickly, or maybe more. The 5 day cycle projection on the cash market is around 2530-40.

If the market drops below 2420 in the first hour, support is suggested around 2375, then 2325. The low in the cash index, and the failsafe level, is 2192.

S&P 500 Hourly Chart


Join me on the 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, Wednesday, March 25, 2020.” 

From snowbound, 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. 

Fed Hyperinflates Its Balance Sheet But It’s Only A Holding Action

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.

Subscribers, click here to download the report

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Is Gold Forming A Base

Here are More Short Chart Picks as New Projection Points to 1300

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!  


“I Am the Greatest!” Muhammad Ali Financial Crisis KOs the Fed

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.

Subscribers, click here to download the report

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Get this report and access to all past reports risk free for 90 days!


Already Soaring Federal Outlays are About to Explode and Boy Is That A Problem

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, for my occasional intraday blurtouts. You can add your very own blurts too.  – Lee 

Try Lee Adler's Technical Trader risk free for 90 days! Follow the money. Find the profits!

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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