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Right Shoulder, Right Shoulder- Roll Over, Roll Over

Stock Market Trading Setup for Thursday, April 23, 2020

The dealers got a windfall from the Fed over the past couple of days. They used that to foment a rally in stocks. But it has been kind of puny relative to what we’ve gotten used to in recent weeks. And it looks suspiciously like a potential right shoulder of a head and shoulders top pattern on the hourly chart.

Of course, wishful thinking will kill you as a trader, and seeing a potential right shoulder is wishful thinking.

Liquidity moves markets!

Follow the money. Find the profits! 

Dayenu!*
*loosely translated, ENOUGH!

Even if they roll over, completed head and shoulders patterns are common.

Dayenu!

And they don’t always break down.

Dayenu!

And even when they break down, they don’t always follow through.

Dayenu!

We’re just looking for lower risk higher potential reward setups.

Dayenu!

S&P Futures Daily Chart 

Yesterday’s post.

The futures have been trading between 2773 and 2805 overnight and in the pre market. It’s up a single point at 2789  at 7:15 AM in New York.

This 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 2734 today. 2743 and 2705 are also support levels. Below that is air space to the next support level at 2627.

Resistance is around 2850 and 2880.

S&P 500 ES Futures Chart

Rate of Change tuned to an 8 week cycle is inconclusive. Direction is uncertain, but absolute level is still positive, indicating that the uptrend remains intact.

MACD tuned to the same cycle looked toppy yesterday, but it’s inching higher today. 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. 

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

The 5 day cycle has topped out. That creates the potential for the right shoulder I kidded about above. An hourly close below 2775 would be needed to activate that potential for a potential right shoulder in a potential top. That’s a lot of wishful thinking for bears.

On the other hand, an hourly close above 2805, could trigger a move to 2825-35, where they’d start to run into resistance again.

Hourly indicators tuned to a 5 day cycle frequency are neutral at 7:30 AM ET. The key to the next move is the trendline at 2785. If market rolls over in the early going, that would give the bears a shot. Otherwise the hourly uptrend is still your friend.

If the market clears 2808, it would be a triangle breakout. These are typically explosive. 

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 2773 and 2805. The area between 2766 and 2840 is a no man’s land. Trading could be very thin and noisy in that range. It won’t mean much until there’s a breakout one way or the other.

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, Thursday, April 23, 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. 

Fed Liquidity Tank About to Run Dry

The Fed has taken its foot off the gas pedal. We’ve been watching this for a couple of weeks now. Crunch time is almost here. Be afraid. Because the Fed doesn’t have a clue what to do next.

Subscribers, click here to download the report

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90 Days Risk Free If You Join Now!

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Trust But Verify Gold

Gold has pulled back after breaking out of its trend channel. That’s usually a sign of a top. Now what?

Subscribers, click here to download report.

Try Lee Adler’s Gold Trader risk free for 90 days!  

 

The Illusion of a Stock Market

Short term cycles are due for tops and little pullbacks at least. If it doesn’t happen, it would be another sign that the long term cycles are back in up phases. But are these cycles, or just the manifestation of the power of the Fed to create the illusion of a market?

How do you trade it? With one eye on the ground and the other to the sky. Walk this way.

Technical Trader subscribers, click here to download the report.

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

What Happens When Fed Makes Moral Hazard Permanent and Structural

The Fed’s massive bailout of Primary Dealers and its alphabet soup loan programs for all other big financial players, have now made moral hazard permanent and structural. Why worry about risk when you know that the Fed will always take you off the hook when the shit hits the fan?

How can we know how this will play out? How can we know if these loans can ever be repaid? Will they be repaid through inflation, perhaps hyperinflation? Or will the borrowers simply default if the markets and economy recover too slowly?

Then who will be on the hook for the Fed’s guarantees when the Fed must assume the losses? Who pays? Taxpayers? Depositors? Everyone, again through massive inflation?

Of course, there’s always a chance that everything turns out just fine. The world returns to normal in a few months. The economy bounces back, and all the trillions lent by the Fed gets repaid timely, with no financial price to be paid.

We don’t know, but there will be telltale signs in the weeks ahead that will give us a heads up.

Subscribers, click here to download the report

Not a subscriber yet?

90 Days Risk Free If You Join Now!

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

Expecting The Worst and Getting It

We expected the worst, and we’ve gotten it. But that does not mean that things will get better. The revenue trends had been strong. Now they’re awful, and spending is unimaginable. How can this be sustained? In this report, I’ll show you the data, and discuss how to handle what’s to come.

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!

 

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 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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