Mea culpa. I did not see this coming. There were signs. I dismissed them. I was in a hypnotic trance, because there wasn’t much different in the TA than we’ve had before during this era of endless central bank money pumping, tilting the market playing fields. You are getting bullish. Very bullish. Bullish, bullish, bullish.
We’ve had a dozen years where negative divergences between technical indicators and the market averages meant nothing. Over the past two days, the market snapped its fingers. This time, they divergences meant something. But I had stopped believing a long time ago. To me, those negative divergences had become the Boy Who Cried Wolf.
That’s all I say about what I missed. As Satchel Paige said, “Don’t look back. Something might be gainin’ on you.” There is a time for post mortems. This is not one of them. This is the time to “read and react.” (Lombardi)
So let’s read, see what we can, and react. Technical Trader subscribers click here to download the report.
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Initial cycle projection on the SPX point to a low around XXXX (subscribers see full report). If that doesn’t hold, there are several trend support areas below that, which could be likely targets for a V bottom bounce. XXXX and XXXX are potential support areas, but they look minor. The big one would be XXXX.
As an aside from my liquidity research, massive amounts of liquidity are coming into the market right now. It started on Tuesday with a big Treasury bill paydown. Another one will hit today. And they’ll do it again next Tuesday. Today also begins Fed MBS settlement week, where it settles all the MBS it bought under forward purchase contracts 30-60 days ago. That’s $122 billion coming into dealer accounts from the Fed, and around $50 billion a week into dealer and other major investor accounts from the US Treasury.
So we have the tinder for a V bottom between XXXX and XXXX (subscribers see full report). But from where? And is this damage fatal to the long term uptrend? Those are the questions.
In the interest of getting to the point and getting this report out to you, below is a brief chart review (subscribers see full report) with brief comments.
These reports are not investment advice. They are for informational purposes, intended for an audience of investment and trading professionals, and other experienced investors and traders. Chart pick performance changes week to week and past performance may not indicate future results, as you know. Trading involves risk, and these reports assume that you understand those risks and manage them according to your tolerance.