Yesterday I reported on how new US Treasury debt issuance policy is crushing the stock market rally. It’s policy, and it will continue. The report delves into the mechanics of how, and why, the government can continue to issue massive amounts of debt despite the debt ceiling. It completely changes the outlook for stocks and bonds. And we know how long it will last.
The effects of the policy were clear in the markets yesterday as the Treasury announced another $63 billion in net new issuance for next week, along with $33 billion already announced. While the pace of issuance will slow from here on, it will still be a huge problem for the market to absorb. Days like yesterday will become norm, rather than the exception.
Yesterday, the ES 24 hour S&P futures broke a triangle pattern. Triangle breakdowns often lead to explosive moves. Yesterday was no exception. The futures hit a sport line overnight, bounced weakly, and subsequently plunged through that. Now, 6:30 AM ET the futures are testing another important sport line at 4053. The most important sport level below that, the January 31 low of 3894, is in the market’s sights.
The market has been running in a 4 day cycle in recent weeks. The low of that cycle is due right now. This cycle has been the manifestation of an apparent merger of the nominal 3 day and 5 day cycles. I would not bet the farm on the duration remaining at 4 days, although I would expect another minor bounce here. The 5 day cycle projection is 4044. If we do a 4 day basis its 4056, right here. However, there’s a 2-3 day cycle projection of 4018. And using the flat base of the complex top pattern as a measuring basis, the measured move target of this move is 4000-4010.
Any of these are plausible targets based on the location of sport lines on this chart. As you can see, there’s a nice little crash channel working, and hourly oscillators are buried at basement levels. That cuts both ways. As long as they stay this low, the market will be in crash mode. The first low is unlikely to be THE low. I’d expect to see a significant positive divergence develop before a decent sized bounce.
For moron the markets, see:
- US Treasury Throws A Shocker to Reverse the Stock Market Outlook February 9, 2023
- Swing Trade Screen Picks – Here are Two on the Buy Side that Stick Out February 6, 2023
- Rally Looks Great But Don’t Chase It Now! Here’s Why February 6, 2023
- SOS – Goldtanic Hits Iceberg, Ship Sinking February 5, 2023
- Composite Liquidity Should Be Bearish, Here’s Why It’s Not Right Now January 26, 2023
- Long Live the Bear. The Bear is Dead January 17, 2023
- A Funny Thing Happened on the Way to the Debt Ceiling January 16, 2023
- Withholding Taxes Fell Sharply in January February 3, 2023
If you’re serious about the underlying forces of supply and demand that drive the markets, join me!
