Shallow Thoughts
The US Treasury has begun carpet bombing the markets with hundreds of billions per week in new supply.
On the other side of the coin, the Fed is printing double or triple that. Not only is the Fed monetizing the Federal debt, it’s monetizing thin air. It’s monetzing nothing. It’s monetizing all kinds of shit that will never pay off the obligation.
How’s that gonna work out for us. Who knows?
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 Tuesday, March 3a, 2020
Hourly ES S&P 500 Futures Chart
Last night the futures broke the crash trendline from the market top. That’s the teal line descending from the upper center portion of the chart. After the breakout the ES spent the pre-market pulling back to the trendline in the normal “return to the scene of the crime. Now what?
Well, they also broke the 1 day uptrend channel and have set a trading range of 2570 to 2636.
We also see a little megaphone pattern currently ranging from 2570 to 2650. Any trading within that range is noise. And once out of that range, there’s not much room either way before they run into another support area. There would be room to run below 2540 and above 2660.
As regular trading began, hourly oscillators were still on sell signals.
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 daily chart gives a broader perspective. Trading overnight and into the opening minutes in New York has been in a tight range. The top of the range is at the exact fiber nacho 38.2% retracement of the crash at 2638. The bottom of the range is exactly at the broken crash trendline at 2574.
Isn’t it amazing how that works.
There’s also an uptrend channel line at 2450. If it holds here, then the target would be resistance at 2706 or even the 50% retracement at 2783.
Conversely, if the ES falls back within the crash channel, the selling could be vicious. False breakouts are usually strong sell signals.
Rate of Change and MACD tuned to an 8 week cycle frequency are mixed. The MACD is still bullish. The bulls have that going for them. However, RoC is now iffy. A downturn from this level would probably mean resumption of the crash.
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.
S&P Cash Index Hourly Chart
The red bar at the far right shows where the futures traded overnight. It covers the same range that the S&P has traded in for the past 4 days. The bottom of the range is around 2520 and the top around 2637.
Here again, once the range is broken either way, there are multiple support and resistance levels that suggest a lot of bouncing around. Not a great trading environment.
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, Tuesday, March 31, 2020.”
From 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.
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The Fed injected around $600 billion into the markets and the banking system last week. That’s about $2,000 for every American, and it was just one weekly installment. All in the valley of Death rode the 600. We are the 600 and the Fed is leading us into the valley of Death.
Meanwhile banking indicators suggest that the sickness is getting worse, not better.
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Massive Fed intervention turned the market, although cyclicality was favorable. The 6 month cycle low was overdue. But is it something more than that?
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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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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.
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