Self Feeding Rally

In the downstairs slinky pattern of the last couple of weeks the ES fucutures sure make it look as though the US stock market is ready to roll over again

Here’s a nice big wide chart of the ES 24 hour trading which you can see in detail if you click to engorge.

We’ve had alternating 3 and 5 day waves. They go up. They bend. They go down. Lower highs and lower lows since mid February.

So you’d think we’re gonna roll over here again. Breaking 3865 would confirm.

Ah, but not so fast. This upwave lasted longer than the 3 previous ones. It was broken up by some nasty selloffs. Then buyers, whether longs buying outright, or shorts covering, came back, bought each dip, and pushed the rally higher. This went on for 3 days. Barring something triggering a crash, which I’m not feeling here, there’s no enough time for this wave to drop to a new low.

Furthermore, the US Treasury is pumping $55 billion into the markets this week, and the Fed starts its usual monthly MBS settlement week tomorrow. The liquidity flowing into this thing will be gargantuan.

So yeah, we might pull back a little here today. If 3865 doesn’t hold, then I’d expect 3855 to be the target. There, multiple trend and cycle lines crisscross to form what should be what the French call “formidable” support.

On the upside, there’s an unmet 5 day cycle projection of 3925. If they clear 3901 in the next day or two, that would complete a perfect reverse head and shoulder pattern that measures to 4100, as I mentioned yesterday.

It’s disheartening to be a bear. Trading successfully requires either a permanently bullish outlook, or totally dispassionate agnosticism. I really don’t care which way the market goes any more. All I care about is being on the right side of the move. We’re not going to fix the world. It’s not fixable.

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