The last day and a half was supposed to be a 5 day cycle down phase. Well, actually it has been, but instead of going down, first it went up, then it went sideways. The hourly cycle oscillators are in fact mostly heading lower, but at very high absolute levels. The next low is due early Monday. That implies that today should be sideways to down, a low early Monday, and then blast off.
The classical measured move target of the base breakout on the hourly chart of the ES 24 hour S&P fucutures is 4520-4530. That’s pretty much done, but it does not guarantee that the market will stop and roll over. It depends. First, if the ES is above 4500 at the close today, that would be bullish. Then, there’s a trend resistance cluster in the 4530-40 area. If they clear that, ohmagawd.
The market hasn’t really been cycling in a visible way, but the trace of that 1.5 day cycle I mentioned earlier this week is still there, and it should be bottoming as I write, closing in on 6 AM ET. That would support another blastoff in the New York regular trading hours this morning.
In any case, the market gods have been good to Technical Trader subscribers this week, after a ragged start in July. Things have gone very well indeed after that itty bitty drawdown to start the month. It was apparently just a matter of the dealers and market makers wanting to load up with inventory before marking up and distributing it.
I keep coming back to the fact the the Fed’s RRP slush fund is working. It dropped another $53 billion yesterday, spurring a rally not just in stocks but also in bonds. Since May 22, $508 billion has come out of that pool. Most of it went to buy T-bills which are perfect private repo collateral. Can’t wait to see how much they rose this week, but that data is only available with a 9 day lag after the close on Fridays. One thing that we do get in real time is money market fund data. Institutional funds saw withdrawals of $25 billion this week. That’s huge too.
These flows are all a sign of raging animal spirits. I will give a complete overview and forecast in the next Liquidity Trader update which I plan to post this weekend. Get informed here.
Meanwhile, the 10 year Treasury yield has reached a critical juncture. Supply is still coming, and the Fed is still draining money from the system. I know which way my bet would be.
Even gold is showing promise here. We actually began to see positive signs in the July 6 report.
Meanwhile, in currency land, the EUR/USD has broken out. The conventional measured move target is somewhere around 1.25. I am locked in with enough cash in EUR for the next two years, but my USD income looks like it will be getting devalued in the months ahead. I can’t hedge it fast enough.
For moron the markets, see:
- One Small Step For Gold, One Giant Leap for Goldkind July 11, 2023
- July Starts Ugly After Fabulous June July 10, 2023
- Stocks Are Scraping the Ceiling July 9, 2023
- Withholding Tax Rebound Sets Up a Bearish Fed Catch 22 July 6, 2023
- Golden 13 Week Cycle Turn and Other Hopeful Signs 7/5/23 July 5, 2023
- It’s Not Your Daddy’s Liquidity Anymore July 5, 2023
- We Now Know What is Driving the Rally June 20, 2023
- The Fed’s Slush Fund is Working June 16, 2023
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