Apparently the market is having second thoughts about Friday’s rally. The futures have reversed most of it.
Stock Market Trading Setup for Monday, May 11, 2020
S&P Futures Daily Chart
The ES futures were up 36 at 28921 at 8:45 AM in New York.That’s down from where they were this time Friday.
They have traded in a range of 2911 to 2947 overnight and this morning. They were below the centerline of the latest uptrend channel, about 1/3 of the way to the channel lower limit. They are approaching support at 2866.The next support level would be around 2855-60. The bottom of the uptrend channel is at approximately 2817. That would need to be broken, at a minimum, for there to be a chance of a downtrend developing.
The daily oscillators tuned to an 8 week cycle are still bullish on balance.
Rate of Change is moving sideways near the zero line. Upturns from around the zero line are normally very bullish. Likewise downturns from this level are typically very bearish.
MACD tuned to the same cycle has been moving sideways above the level reached in the Q4-Q1 advance. This signifies that the market is in trending mode. This indicator stayed near this level for 3 months before the market topped out. I wouldn’t get bearish until this turns down and price breaks support. As long as this indicator stays flat up here, it’s bullish.
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, I cover that in the Technical Trader service at Lee Adler’s Liquidity Trader.
Hourly ES S&P 500 Futures Chart
The overnight downturn looks dramatic on the hourly chart. It easily broke a couple of would-be support levels. It threatens two more support lines at 2892 and 2888.
It has broken multiple uptrend channel lines, and has not yet established an hourly downtrend channel. The next definitive support level if 2888 does not hold would be trend support rising from 2870. The 5 day cycle projection looks like 2875.
If 2888 holds, there could be a quick move back to the Friday high of 2946, but look for possible resistance at 2902 and 2922. If they start to roll over from either of those levels, bears could take control.
Momentum, True Strength, and MACD tuned to a 5 day cycle are bearish. They remain above the levels where they last bottomed, implying that there could be more downside to this move.
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.
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Meanwhile, here are the latest reports from Lee Adler’s Liquidity Trader.
Stocks are selling off this morning but the trend still favors the bulls. Here are the parameters to watch that would confirm, or signal a change.
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Macro liquidity has slowed slightly in recent weeks as the Fed has taken its foot off the accelerator. But it continues to grow at an historic pace. What does that mean for the short term and the long term.
Oh, wait.
There is no long term.
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The Fed has cut back its POMO purchases to an average of $8 billion per day of Treasuries and $6 billion of MBS this week. That’s down from $10 billion and $8 billion last week, and hundreds of billions in the peak of the panic in April.
The effects of that are beginning to show up in stock prices. Be prepared because here’s what happens next.
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