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Fed QE Squeeze Market Effect for Today

Stock Market Trading Setup for Monday, April 27, 2020

The Fed is really tightening the screws on Primary Dealers this week. So far, stock futures traders are laughing and farting in the bears’ general direction.

S&P Futures Daily Chart 

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Yesterday’s post.

The futures have been trading between 2814 and 2865 overnight and in the pre market. They’re up 26 at 2857  at 8:15 AM in New York.

The uptrend channel at a slightly lower angle than the previous meltup channel from the March low is still intact. The bottom of that channel is at 2776 today. 2743 and 2705 are also support levels. Below that is air space to the next support level at 2627.

The futures are hitting resistance around 2860 as I write this.  The next resistance level is around 2885. Above that are wide open spaces to 3135. I expect a helluva battle at 2885. If it even gets there. Call me a sheptick.

S&P 500 ES Futures Chart

Rate of Change tuned to an 8 week cycle remains inconclusive. A downturn is definitely due. Current direction is flat, but absolute level is still positive, indicating that the uptrend remains intact.

MACD tuned to the same cycle has looked toppy for a week. It was a tease. It’s inching higher. A market decline today could trigger a downturn, and thus a sell signal. Otherwise, the uptrend would remain on day to day status. 

If this is still a bear market, we’re at the point that that needs to be proven by a real downturn. Say Kaddish for bears if the ES breaks through 2885. 

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.

Hourly ES S&P 500 Futures Chart

Both 3 and 5 day cycles are ideally due for downturns today.

Resistance is set at 2865. The futures are challenging that now. The 5 day cycle projection looks like 2870. Close enough.

This could be a double top. Or not. The price is dead center in an uptrend channel. Momentum and cycle indicators are moving sideways. Is it a top or consolidation? Oh the suspense!

If they clear 2865 the next target appears to be 2876. The bottom of the uptrend channel will be around 2850 in the NY opening hour. The bears need to retake that to avoid extinction.

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 Cash Index Hourly Chart 

The red bar at the far right shows where the futures traded overnight. It’s between 2814 and 2865.

Uptrend channel support starts the day at 2818 and ends at about 2834. Bears need to break that or they are in big trouble. The previous pivot high is 2875. There’s probably 100 points of clearance above that before a rally reached the next resistance area.

On the downside, there appears to be a lot of air between 2800 and 2750. That doesn’t appear to be in play, at least in the first half of the day. First they would need to break that 2818-2834 uptrend line.

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, Monday, April 27, 2020.” 

From coronavirus locked-in, and earthquake-ridden 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. 

The Fed Has Won the Battle

Massive Fed intervention has once again tilted the long term playing field. Evidence is increasing that we will not see the March low materially exceeded in nominal terms. This may have little meaning in terms of the future purchasing power of a dollar, but at least nominally the worst seems over. The Fed has won this round and is, for now, again in control of the stock market.

Technical Trader subscribers, click here to download the report.

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The Fed is the Ventilinflator

Ever resolute, the Fed kept pumping the cash into Primary Dealer accounts. It kept at it until, as I calculated elsewhere, it had pumped in about $800 billion more than the dealers, and indeed the entire world, needed to absorb the flood of Treasury supply that was hammering it. That happened by the middle of April.

It was enough for the dealers to get back to their fun business of acquiring inventories of stocks, marking them up, triggering short squeezes, and convincing their herds of institutional sheep customers to follow the shorts and dive back into the market with whatever cash they had raised on the way down.

It worked, as we all know. Stocks have recovered around 55% of what they lost in the crash.

But the Fed has started to do the tighten up. Here’s what you need to know.

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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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