Surprise (Not) Rocket Launch From Support – Stock Market Trading Setup

S&P futures are bonering. They hit support yesterday, and surprise, surprise, the dip buyers were out in force. Well, not a surprise actually if you recognize that the Fed pumping $100 billion a month into dealer trading accounts permanently tilts the playing field. Doesn’t mean that the market can’t go down, just that it probably won’t stay down for long.

The raison du jour for the rally is now Coronavirus Containment. Before it was trade war hopes and fears. Now coronavirus has taken center stage. More people die from gun violence in the US in a day than coronavirus has killed, but hey, let’s make it the cause of stock market panics. In both directions.

Liquidity moves markets!

So, time for a little 4:30 AM NY time perspective again. Let’s look at the weekly bar chart of the Shanghai Composite. Yes, that little green bar on the far right, way down below the rest of the bars is bouncing.

Meanwhile, back on Wall Street, the S&P fucutures (ES) looked like this at 4:30 AM Noo Yawk Toime.

Are we surprised that the 50 day moving average and the prior support level generated a huge bounce? No, we are not. That support showed up in my proprietary measures as well in my weekend report in Liquidity Trader. I had warned that a bounce was in order.

It has followed through overnight in Asia and Europe. But the ES is back to trend resistance at 3282. This is obviously an inflection point. It should pull back from here, but momentum suggests more upside. The next minor resistance level on the ES would be 3292.

Here’s the S&P index, hourly chart. The futures are currently trading where that little white circle is on the right. The downtrend is broken on the hourly. But the current price is right at the level of Thursday’s high. If New York opens at or below this level and pulls back, then the 5 day cycle projection would only be 3282 and this phase of the pop would be over.

If they hold 3282 and start to move higher, then the target would be 3294. And if that’s cleared, look for 3306.

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