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Reverse Reversed – And 20%? Why Should You Care?

S&P 500 ES Futures Chart

Shallow Thoughts

Bull or Bear Market? Who cares what they call it? The idea of an “official” bull or bear market is not only insane, it’s just plain stupid.

Who made up the rule anyway? And why would it apply across all markets and all instruments? Some stuff moves 20% in a week, and some doesn’t move 20% in a decade.

Neither Charles Dow nor his successor publishers at Dow Jones, William Hamilton and Robert Rhea, who literally wrote the book on Dow Theory, ever said anything about a percentage change determining whether the major trend was bullish or bearish. They talked about wave progressions and the agreement or divergence of the Industrial Average and the Rails (now Transports).

That makes a lot more sense than a blanket 20% standard whose origing no one knows, and yet no one questions. Jackasses. Some jackass on CNBC said it one day, and all the other CNBC jackasses nodded their heads in agreement and said, hyah, hyah.

Now that the S&P is 20 some percent off the lows these same pundits are calling a new bull market. So now if it drops back to 2201, it’s still a bull market because it’s not a 20% loss, even though it’s down 33% from 2 months ago? Which do you think investors notice more, the 25% rebound or the 19% or so that it’s still away from the highs? Some popular stocks, a whole lot more.

And remember, to get back that 19% loss, the market would need to rally 23% from here.

Ah, math and semantics.

From my perspective as a chartist we need only know that the market has yet to make a higher low followed by a higher high.

OK, there’s no certainty here. We’re in limbo. The trend may no longer be down, but neither is there convincing evidence yet that it’s up. From a Dow Theory perspective, the Industrials would need to make a higher secondary low than it did in April, followed by a higher high, and the Transports would need to confirm. Just a little pullback from here could set the stage, but it’s not a slam dunk.

Long term cycle oscillators are a more modern and mathematically oriented means of estimating whether the long term trend is bull or bear. I show you where things stand on that in today’s issue of Technical Trader.

We’re near a turn, no question, but close is no cigar. I wouldn’t light up that stogie yet. In fact, there may still be some coin to be made on the short side, at least for that first pullback, if this is a bull.

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 Monday, April 13, 2020

Thursday’s post.

Hourly ES S&P 500 Futures Chart

The S&P ES fucutures are down about 12 points at 2768, at 8:45 AM in New York. They had been down 40. I have no idea why either was or is the case. It just is. And what “is”, is now a trading range, with an upward tilt. The bottom of the range is currently at about 2736 and the top is roughly 2840.

Hourly indicators tuned to a 5 day cycle frequency have turned up, after being weak overnight. This looks like the start of a 5 day cycle up phase. There’s a good chance of seeing the top of the range channel later today or tomorrow.

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 

The daily chart gives a broader perspective. The futures have been traded between 2776 and 2730 overnight and in the pre market.

The sharpest daily uptrend channel is now broken, but the broader meltup channel remains iin force. The bottom of the channel is at 2640 today. The top is at 2990. Before that comes iinto play, the market would face resistance at 2820 and around 2860-2885.

S&P 500 ES Futures Chart

Rate of Change and MACD tuned to an 8 week cycle remain very bullish. So the benefit of the doubt still goes to the bools here.  

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’s between 2730 and 2776. Resistance is indicated at 2816.Support is probably around 2750, with more important trend support at 2700. That would need to be broken to end the uptrend.

If the market opens strong, then there’s a chance of clearing big resistance around 2825-30 and running right to 2890-2900.

The 5 day cycle oscillator was mildly bullish when the market closed last week. A weak first hour could shift that to a sell from a huge negative divergence which would give the bearish case the upper hand. S&P 500 Hourly Chart

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 13, 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. 

What’s the Context, Bear or Bull?

What happens this week could tell us whether we’re in a bull or bear market.

As of 4:15 AM ET on Monday, virtually all of Thursday’s market gain has been wiped out. The S&P futures were trading at 2742, which would put the S&P cash index back below the centerline of the trend channel. Bears would have a foothold, but it’s where Monday finishes that matters, not where it starts.

Here are the critical parameters and levels you need to know to be positioned correctly.

Technical Trader subscribers, click here to download the report.

Not a subscriber? Try Lee Adler’s Technical Trader risk free for 90 days!  

Fed Monetizes While the US Burns

Federal tax collections are collapsing but the US Treasury now has $827 billion in cash in its bank account at the Fed. This is double the previous highest level ever. This money has all come via debt sales over the past week.

The Fed funded every single dollar of that expansion through its purchases of the Treasury debt. The Fed used Primary Dealers as middle men. The dealers collected a nice skim and the Fed monetized the debt, while being able to claim that it didn’t. But this is money that did not exist two weeks ago. Now it does.

This has frightening implications. Here’s why, and what you should do about it.

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!

 

Join the conversation and have a little fun at Capitalstool.com. If you are a new visitor to the Stool, please register and join in! To post your observations and charts, and snide, but good-natured, comments, click here to register. Be sure to respond to the confirmation email which is sent instantly. If not in your inbox, check your spam filter.

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