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Broken Sport 5/24/23

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I was on the train from Warsaw to Malbork yesterday. Malbork is as quiet as Warsaw is noisy. In other words, really, really quiet. Just what the doctor ordered after 11 days of not sleeping thanks to the insane noise levels in one of Europe's most crowded, overdeveloped, and certainly most car crazy cities. I mean, Barcelona is noisy, but Warsaw is, I think, noisier in more places.  

Meanwhile, bears finally made some noise on the Street yesterday. I had demarcated 4170 as the place where I expected sport to show up, but it didn't. They broke it, and today might feel like it's set up for more. BUT, as I've been pointing out, today is the idealized 5 day cycle low. And we've been teased before, not to mention tased before. 

So we'll see. As of 3:20 AM NY time, the ES, 24 hour futures are near a 5 day cycle projection of 4135. But a nice little top pattern has also broken down. It has a measured move target of 4075-80. There are multiple sport lines in the 4110 area. Given the likelihood of a 5 day cycle low in the early going today. I'd be on the lookout for a turn somewhere around there. 

They just edged below an earlier low set yesterday. There are no positive divergences on the hourly oscillators yet, but they are buried at levels where the last couple of minor lows formed. So maybe we get a lower low here, but I'd expect a rally later.

105w6y

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What i don't like:

This view, that after the ceiling is lifted, the Treasury will borrow like mad and will suck up liquidity by its issuance and therefore stocks will tumble, becomes to prominent. Give it aother week and CNBC will talk about that 24/7.

So, therefore, we already know that it will not happen that way.

CB's are quite creative. Maybe the BoJ sucks it all up. Who kmows. in the last 20 years I have seen too many "safe bets" imploding...

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I agree. Months ago, I was a lone voice in the wilderness warning about that. Now it's a consensus view.  The Most Widely Forecast Economic Disaster In History

Of course, sometimes the consensus is right. In the meantime, the central banks loom, ready to step in at the first sign of a hiccup in the markets. 

This market in particular. The one month base breakout points to a target of 3.93. Above 3.95, the thing could spin out of control, inviting intervention. 

105x-c

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2 hours ago, DrStool said:

 

Of course, sometimes the consensus is right. In the meantime, the central banks loom, ready to step in at the first sign of a hiccup in the markets. 

 

 

Yes. Something like "big problems at a major European insurer" would already be enough. Remember. This thing is globally interconnected, it doesn't have to be an american company/bank/insurer for the FED to step in with both hands. The big central banks work together on a daily basis. At any minute in time the FED knows what the ECB/BoJ/BoE/SNB plans/does and vice versa.

How deep they would allow the S&P to fall? Hmm, hard to say. Could be a quick one week move where it looses 500 points, then they step in. Where that will be? Who knows. Maybe 3500, maybe 3200, maybe quick dive below 3k? Something like that.

We could also see the Covid lows again. But that would simply mean to extrapolate the 2000 bear and the 2008 bear and say that the fall of this bear yet will have the same magnitude. Could be, but has not to be.

THE nominal low of the 70s bear was in 1974. AFTER that the shit for the economy and society really began, 1981/82 recession included. Folks often confuse "the real economy" with "the stock market".

Job market is lagging, not leading. The low in stocks comes long before the high in unemployment.  

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41 minutes ago, fxfox said:

The low in stocks comes long before the high in unemployment.  

I don't think so. More concurrent. 

The Fed is the world's central bank. 2/3 of Fed primary dealers are foreign banks. When the Fed does QE, it flows to the entire developed world from Germany to Japan. ECB and BoJ fill gaps in Fed policy as needed. 

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THOUGHTS ON THE GREAT LIQUIDITY SUCK UP

Yes the US Treasury could issue lots of debt and the market could tank.....

But then the FED could simply print to neutralize this........

Or lower the amount in the RRP to soak up the excess......

China could suddenly buy more Treasuries to keep the exchange rate suppressed to help their exporters ..... 

A sudden outflow of bank deposits could soak it up.....

Too many unknowns to ponder or predict correctly.

Trading on this idea is a crap shoot!!!!

"The more widely something is anticipated the less likely it is to occur"

 

However I will caveat this ....tech is way overbought.

The market is just the big 7 tech stocks.

They have to break sometime.

Fragility builds up under the surface.

Even as the stocks make higher highs.

Until the breeze from a butterflies wings can break the biggest of stocks.

(i.e. even selling from anticipation of the post deal liquidity squeeze could tank the stock market)

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4 minutes ago, Jimbo said:

THOUGHTS ON THE GREAT LIQUIDITY SUCK UP

Yes the US Treasury could issue lots of debt and the market could tank.....

But then the FED could simply print to neutralize this........

Or lower the amount in the RRP to soak up the excess......

China could suddenly buy more Treasuries to keep the exchange rate suppressed to help their exporters ..... 

A sudden outflow of bank deposits could soak it up.....

Too many unknowns to ponder or predict correctly.

Trading on this idea is a crap shoot!!!!

"The more widely something is anticipated the less likely it is to occur"

Absolutely!

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45 minutes ago, DrStool said:

I don't think so. More concurrent. 

The Fed is the world's central bank. 2/3 of Fed primary dealers are foreign banks. When the Fed does QE, it flows to the entire developed world from Germany to Japan. ECB and BoJ fill gaps in Fed policy as needed. 

Let's say the low in stocks comes A BIT before the high in unemployment :lol:

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7 hours ago, DrStool said:

There are multiple sport lines in the 4110 area. Given the likelihood of a 5 day cycle low in the early going today. I'd be on the lookout for a turn somewhere around there. 

 

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19 minutes ago, BurntOnce said:

it's a given that social security must be cut by 25%. so bring it on.

Ya that's the problem... :wacko2:, let them eat dog food.  It's their own fault for living so long... 🪦

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12 hours ago, DrStool said:

There are no positive divergences on the hourly oscillators yet, but they are buried at levels where the last couple of minor lows formed. So maybe we get a lower low here, but I'd expect a rally later.

Good night, and good luck Tamara. 

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