The very short term trends remain bullish, but the shakeouts and individual breakdowns make it difficult for the longs to stay long. And give the bears hope. Both give the market fuel to go higher late in the day.
From the standpoint of the hourly oscillators, the move looks cooked, with negative divergences developing. But multiple uptrend channels are intact and a 5 day cycle projection and round number magnet of 4400 work like magnets pulling prices higher. The 2-3 day cycle projection looks even higher at 4410-15. And then there’s the measured move implication of the base breakout, pointing to around 4460.
I wouldn’t expect that to happen today, but stranger things have happened. The pullbacks put fuel in the tank for a potential short squeeze. Looking at the 2 hour bar chart of the ES, 24 hour S&P futures, it would appear that if the market clears 4406 this morning, there’s absolutely nothing in the way to stop a blowoff move to 4440 or even 4450-60. The Big Low
Zooming in to the hourly bars, you can see that in order to break the uptrend, the ES would need to drop under 4377 by the first hour of New York trading, or below 4387 by the close. If it stays above that, the potential for a blowoff will remain intact.
That possibility could get some assistance today from the settlement of $9 billion in T-bill paydowns. Put $9 billion back in the pockets of investors and if even 10% of that gets diverted into a few stock purchases, it could light a fuse for something bigger. Next week that goes the other way with crushing supply settling mid week. Tepid Tax Collections Mean It’s the Supply But not today. Today is easy day.
I sure hope so. I traded my ass off yesterday after seeing trading profits melting to losses by late afternoon. I peeled off shares that were breaking, and then sat and sweated and prayed as I watched the stronger positions come back to test support. Late in the afternoon, I added to those stakes, and was rewarded for my fortitude by my account going from pretty negative to earning $1 on the day. That’s right. I worked all day for $1. Literally.
But it was a moral victory. Which count for a lot in this business. Just keep telling yourself that, and soon enough you can play with a paper trading account. No stress.
Next we go to Gary, US Bonds where the “surprise” rally (not to us) has come to trend resistance, which on the chart of the 10 year yield shows up as spport around the 4.50-.55 level today. If that’s broken, there’s room for the rally to get up a head of steam. But not, methinks in the face of $100 billion in new supply that will need to be paid for next week. Tepid Tax Collections Mean It’s the Supply
By the way, I’m slowly but surely working up an update on Primary Dealer positions and financing that will hopefully enlighten us on whether, and for how long, these rallies in stocks and bonds can be sustained. Look for that update this weekend.
Is a bearish trend in bonds bullish or bearish for stocks?
No.
Intermarket analysis is a joke. What correlates one day decorrelates the next. There is no cause and effect relationship. It’s merely a matter of whether market participants have, on balance, enough cash to buy both markets or not. Under QE, there was plenty of cash to fuel bull moves in both concurrently, so they moved together. Once QE ended the random nature of the correlation was exposed.
If you want to estimate how a particular investment class will trend, the best way to do that, and in my view the only way, is to focus on its own chart, not the charts of other investments which may randomly correlate for varying periods of time, for varying reasons. Let’s face it. There IS a lot of randomness in this business. And apparent randomness for reasons unbeknownst. Therefore, intermarket analysis is a waste of time and energy. It’s why market poodits are constantly getting whipsawed in their explanations to their media sychophants on why the market did something today, and then does the opposite tomorrow.
Which brings us to gold, another class of investment, which correlates with nothing other than our level of frustration. Inflation hedge? My ass. Financial instability hedge? My ass. But does it follow the precepts of TA in its own right? You bet. Look at how this trend channel held up. Gold Breaks Down, With Long Term Implications
No doubt the dealers who run this market will get the thing back to 1913, in a symbolic middle finger to the Fed. But whether this rally has bigger implications, we’ll just need to wait and see. I’ll address that in the next Gold Trader update. For now, this is where things stand in the bigger picture: Gold Breaks Down, With Long Term Implications
For moron the markets, see:
- Veal Market – Baby Calves Get Slaughtered October 9, 2023
- The Big Low October 8, 2023
- Gold Breaks Down, With Long Term Implications October 5, 2023
- Tepid Tax Collections Mean It’s the Supply October 4, 2023
- Screen Picks – Definition of Insanity Exemplified October 2, 2023
- Gold Breaks Down, With Long Term Implications October 5, 2023
- The Rhymes of History September 24, 2023
- Here’s Why This Is a No Clickbait Market for Primary Dealers August 24, 2023
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