Shallow Thoughts
I don’t even have shallow thoughts today. I have no thoughts. I’m working on updating Liquidity Trader reports on Federal tax data, both the monthly data that came out Friday, and real time tax and energy data that’s released daily and weekly. No surprise. It’s ugly. I’ll post that report this afternoon.
Then I’ll follow with an update on Primary Dealer positions. That should be interesting. We already knew that they made a killing in the Treasury market in Q1. Now Primary Dealer earnings reports are confirming that.
But they’re getting killed on everything else. That wasn’t hard to figure out either. I’ve been reporting for the past couple of years how dangerously and historically low their loan loss reserves were.
So stay tuned for all that over at Liquidity Trader. I want to say a special thanks to those of you who have subscribed in recent days. It’s humbling. I will work hard to continue to earn your trust for the long term as well. As you do everything you can to stay healthy, I want to contribute by helping you stay healthy financially.
I guess I had a few shallow thoughts, after all.
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 Wednesday, April 15, 2020
Hourly ES S&P 500 Futures Chart
The S&P ES fucutures have fallen hard after reaching a confluence zone of several trendlines around 2840. At 8:25 AM in New York, we were down nearly 64 points. at 2779. That’s in the lower half of an uptrend channel.
There are 3 tests of the uptrend coming up. The first is a trendline at 2755 in the next hour. Then a support level at 2740, followed by a downtrend line at 2728. Each of those should be base for a bounce. If they fail, we’ll be at 2700 in a heartbeat. Traders like to cover shorts at round numbers.
If they don’t, we could be in for an epic collapse. At 2700 the market would complete a top pattern a week in the making. A breakdown would have a measured move target of 2560.
Hourly indicators tuned to a 5 day cycle frequency started to turn bearish yesterday at 5 PM ET. That was quite a nice signal, but unfortunately, I don’t post these reports in the evning. Enough work already.
Those indicators still point down, but they’ve reached the levels of the last minor lows. If the market doesn’t bounce by 11 AM, that would suggest that the most bearish scenario, a drop to 2560, is in play.
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 2768 and 2835 overnight and in the pre market. The current price is at the bottom of that range. It has broken a 6 day uptrend.
It’s still 50 points above the trendline from the March low. That line is at roughly 2720 today. The next support level is at 2706. Then there’s an apparent support vacuum to 2620, with the next support at 2560, which is also the measured move target of a breakdown, if it happens.
Rate of Change and MACD tuned to an 8 week cycle remain very bullish. Normally I’d say that the benefit of the doubt still goes to the bools here. But in this case, I would defer to what happens at the trendline at 2720. If it holds, then this was just a vicious shakeout, and they could quickly get back to the 2850 area.
If 2720 breaks, buckle up.
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 2768 and 2835. Resistance is indicated at 2835.If they somehow hold the market together, there’s nothing to stop it from returning to that level.
Support is around 2768 and 2720. If they break, then we’d be looking at the 2670 area for trend support. That’s the location of the trendline off the March low today. If it breaks, expect a quick trip to 2600.
The 5 day cycle oscillator will turn down from the third lower high in a huge negative divergence. This could be a case of the third time’s the charm for bears.
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, Wednesday, April 15, 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.
I warned about it last week when the Fed’s POMO schedule first showed a reduced purchase rate. The Fed is taking its foot off the gas pedal. Here’s what that means for your stocks and bonds.
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Gold has reached trend resistance and 10-12 month cycle momentum is at the level where it peaked last year. Here’s what to expect, along with a few mining picks. Dig it!
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.
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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.
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Get this report and access to past reports. Read Lee Adler’s Liquidity Trader risk free for 90 days!
Treasury issuance will go through the roof over the next 5 days while the Fed has decided to cut back its support. That’s a bad combination.
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I remember reading your stuff years ago through money press and always enjoyed your perspectives on the Fed and general market matters. Then you disappeared and I went on to other things. During these times I had to know “where in the hell are you.”
Well I am, glad you’re healthy and still in the game. I appreciate all your work, effort, guidance and sincerity. Thanks
Thanks John. I’ve always been here. October will be 20 years! Money Market Press and their Sure Money Investor publication were but a brief interlude. I enjoyed my time there but I didn’t fit with their business model, unfortunately.