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Triggering a Stock Market Breakout By Using Up Cash

S&P 500 ES Futures Chart

Stock Market Trading Setup for Tuesday, April 28, 2020

The Fed is absorbing just a fraction of this week’s massive Treasury issuance, but stock futures continue to levitate and have broken through a key resistance level. Smoke and mirrors, or just smoke from burning cash.

S&P Futures Daily Chart 

Yesterday’s post.

The futures have been trading between 2850 and 2909 overnight and in the pre market. They’re up 39 at 2908 at 8:30 AM in New York.

The market is now at mid channel in an uptrend channel at a slightly lower angle than the previous meltup channel from the March low. The bottom of that channel is at 2800 today. The centerline is at 2920.

The futures have cleared resistance at 2855 and 2880. They now become potential support. If the futures don’t hold above those levels, then it would be a failed breakout and a likely short term reversal.

If the breakout sticks, above it are wide open spaces to 3000 today. That’s trend resistance. The next significant resistance level from a prior high is at 3135. The Hurst 5 day cycle projection is 2955. S&P 500 ES Futures Chart

Rate of Change tuned to an 8 week cycle is bullish, both in terms of direction and absolute level. A downturn is due, but as long as the indicator is in positive territory, I wouldn’t get too bearish. 

MACD tuned to the same cycle has looked toppy for a week. It was a tease. It has accelerated and is now at the level reached in the Q4-Q1 advance. Note that it stayed up there for 3 months before the market topped out. Ugly. I wouldn’t get bearish until this heads down and price breaks support. 

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 market just plows through what should be resistance like it’s not there. The latest level to disappear is 2900. If not immediately reversed, that becomes support. Trend resistance is at 2912. That’s a convergence of a couple of trendlines. I’d expect a pullback from there.

On the off chance that 2900 does not hold as support, there’s air below to 2885, and trend support at 2875 in the first hour. Bears should not get too excited as long as either of those levels hold.

ES Futures Hourly Chart

Momentum, True Strength and MACD tuned to a 5 day cycle remain bullish and aren’t ideally due to peak for another couple of days. This is a recipe for strength to continue through tomorrow’s Fed announcement–a classic faith in the Fed rally. Then we’ll see.

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.

Join me on the 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, April 28, 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.

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


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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