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Perfect BULLISH setup this week


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#1 dTraderB

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Posted 27 January 2019 - 09:05 PM

...and yet, BULLS not trampling the bears!

 

Is it too good to be real?

 

-- SHUTDOWN is over, at least for a few weeks

 

- Trade talks this week with good possibility of a deal or "progress" as defined by both US & CHINA

 

- FED has signaled, allegedly so, that they are about over with QT; no hikes at this meeting, and possibility of eve more dovishness 

 

However, earnings season continues and it appears as if this is the key factor restraining the bulls.

 

SP 200ma is the major resistance and 50ma is the major support.  

I think the markets will rally 2 to 3% (SPX) from Friday's close but will find it difficult to go much further unless 

there are more good news during the week.

 

 



#2 dTraderB

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Posted 27 January 2019 - 09:10 PM

"We expect the S&P to take out the recent high at 2675.47 and then set its sight on 2710-2720, which is the zip code of a yuuuge Fibo level and the 100-day moving average.  Probably the place to sell but will revisit when we get there.   This, of course, assumes no rupture in China trade talks.

On the downside, the big, big, big number is last week’s low of 2612.86, which is now the 50-day moving average.

Huge week for earnings and China trade.

That’s our short-term view, folks, and, as always, we reserve the right to be wrong, which we often are.  All of us have no idea of the future and are driving in the fog.  We can only use our imprecise instruments to guide us.   Happy hunting next week, folks."

 

week_chart_8.png?w=356&h=998

https://macromon.wor...iew-january-25/


Edited by dTraderB, 27 January 2019 - 09:11 PM.


#3 dTraderB

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Posted 27 January 2019 - 09:16 PM

The rally on Friday was based on the Fed will turn exceedingly "dovish" in a meeting next week. This could well wind up disappointing the markets.

 

Last week, we added equity exposure to our portfolios with the acquisition of some companies that we like the fundamentals of.However, we also swept a large portion of our trading cash into 1-3 month Treasury bills as the risk/reward for equities remains negative.

Even if you are exuberantly bullish, you should consider Mark Hulbert'sanalysis from this past week:

 

The Dow Theory is still flashing a "sell" signal. Before this indicator can turn bullish again, the rally that has taken the Dow Jones Industrial Average almost straight up since its Dec. 24 low must end.

That's why bullishly predisposed Dow Theorists should be hoping for a market pullback.

Though individual Dow Theorists disagree on the specifics of how to apply the Dow Theory in any particular situation, there is a broad consensus on what it takes to generate a buy signal:

1. Both the Dow Jones Industrial Average and the Dow Jones Transportation Average must undergo a "significant" rally after hitting new lows - "significant" both in terms of time and magnitude. This step has been satisfied by the market's rally from the Dec. 24 lows.

2. Both of these Dow averages must subsequently undergo a "significant" correction of the rally referred to in step #1, and in this correction either one or both of these Dow averages must hold above their previous lows (Dec. 24). We are waiting for this step.

3. Both averages must rise then rise above their highs registered at the top of the rally referred to in step #1.

One of the lesser-appreciated aspects of this three-step process is that, without a "significant" pullback (step #2), a buy signal will never occur.

This is why we concluded last week by stating:

"Overall, the weight of evidence suggests a retest of support at which time portfolios can be re-evaluated."

 

 

saupload_SP500-Chart1-012519.png

 

https://seekingalpha...caves-bulls-run



#4 dTraderB

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Posted 27 January 2019 - 09:18 PM

Fed Caves - Bulls Run

 

WSJ article suggesting that the Fed would not only stop hiking interest rates but also cease the balance sheet reduction which has been extracting liquidity from the market. This was quite the change as noted in an early morning tweet.

saupload_Untitled_1.jpg



#5 dTraderB

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Posted 27 January 2019 - 09:23 PM

Carl:

 

Last week we were focused on the SPY rising wedge formation, the technical expectation for which was that it would break down. Well, on Tuesday it did break down, but there was no follow through afterwards. Instead, it moved sideways for two days, then rallied on Friday, challenging Monday's highs.  The result is that the wedge has almost transformed into a rising trend channel. I say "almost" because there is still a slight narrowing at the top of the channel. Nevertheless, of more immediate concern is the overhead resistance presented by the declining tops line drawn from the October top, which could force another rising trend line break.

15484543059521495638452.png

https://stockcharts....sing-trend.html



#6 dTraderB

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Posted 28 January 2019 - 06:55 AM

The sudden extreme dovishness of the FED, the twists & turns in policies, and the apparent willingness to please politicians and Wall St have caused people to wonder if things are much WORSE than they actually are! Sure, we will buy to make zillions when the FED goes more dovish every week but there is unease about this 

willingness to appease the markets....

 

Jerome Powell has some further explaining to do after the Fed’s monetary messages whipsawed financial markets over the last month



#7 dTraderB

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Posted 28 January 2019 - 06:58 AM

ECRI’S Lakshman Achuthan: A chart suggests another 10 to 20 percent correction will strike stocks
 

PUBLISHED SUN, JAN 27 2019 • 12:07 PM EST

Stocks may be on the brink of another correction.
 
Despite 2019′s strong start, the Economic Cycle Research Institute’s Lakshman Achuthan believes the market remains in a danger zone, because there’s evidence economic growth is still decelerating.
 
“The elephant in the room remains the cyclical slowdown. And, as long as that slowdown is in play... the risk of a correction remains. It hasn’t gone away,” the firm’s co-founder said Friday on CNBC’s “Trading Nation. ”
 
Achuthan, an economic forecaster, draws his conclusion from a chart showing S&P 500 Index corrections and slowdowns over the last decade. The shaded areas represent U.S. growth rate cycle downturns.
 
 
 
“It’s really about the direction of economic growth. It accelerate

 

https://www.cnbc.com...correction.html

 

 



#8 dTraderB

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Posted 28 January 2019 - 07:01 AM

Trump tells WSJ another government shutdown is 'certainly an option'    NO, DO NOT! 

 

JP Morgan’s Wall Street chief says more market meltdowns like December’s rout are coming
PUBLISHED 18 MIN AG

 

  • Investors shouldn’t be surprised if markets behave like they did in December, according to J.P. Morgan co-President Daniel Pinto. 
  • “Markets will tend to overreact to things, and you have these big moves, and then a correction to rationality,” said Pinto. 
  • https://www.cnbc.com...inevitable.html


#9 dTraderB

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Posted 28 January 2019 - 07:05 AM

And, so far, they have botched it.

 

Peter Morici: Fed faces challenge of engineering a soft landing

Powell should pull up on the stick and put rate hikes on hold through the summer

The problem is that, since the 2000s, U.S. long rates have been suppressed by foreign investors. Europeans stuck in a lethargic economy, and Latin Americans and Asians fearful that their corrupt governments will ignite inflation to solve their debt problems, have been buying up U.S. real estate and long bonds.

Similarly, the dollar has increasingly become the preferred currency for all global trade, further increasing the demand for U.S. bonds.

Those unhinge the relationships between business expectations and interest rates. For example, the yield curve has been sending warning signals since late 2017 but the economy sped up last year instead of slowing.

Lacking the Phillips curve and yield curve as tools, Fed Chairman Jerome Powell is flying without an altimeter and air-speed indicator. Not being an economist, he hasn’t been to pilot school either.

The best thing . Powell can do for now is pull back on the stick and announce he is not planning any more interest-rate increases until at least this summer.



#10 dTraderB

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Posted 28 January 2019 - 11:52 AM

I may close a few QQQ puts, maybe only 5 later in the day

 

No pressure to do so, just looking to trim the position