In tandem prices pulled back sharply today, which conjurs up the imagery of the “Dog Chasing a Car..” signal. The dog never catches the car (usually) and the money restores the market function. The drop on the left looks a great deal like the drop on the right.
From there prices on Tuesday cut through the descending blue dot trendline and never looked back. The double or rather triple oversolds marked the bottom, the triple oversold was a bell ringing divergence in money flows, and proves anecdotally that the money flows are working in a more orderly fashion. I pinned the money flows at that first dip and extended them for us to see that even with a broken test of yesterdays lows, the money flows are still above that watermark.
In the blue circle there is a convergence of the two trend lines and a support resistance which was also a jumping off point last Friday. Prices should never get near that convergence but after a brief test around the 410 level probably at the blue dot trend line, they should break through. SHOULD. Just a gut feeling that I have seen this happen before when the markets were hemorrhaging money, as they are wont to do now. Should they fail the money fails and that is a news story. The second leg of this bear market or capitulation comes when the strong hands sell their shares.
If you don’t see what you are looking for, that should be reason to consider the alternative. Groundhog watching. Crypto is now flying in formation, it’s officially an asset class. Difficulty if they fly too low they do not have the reserve power. Fed isn’t going to print Bitcoins and hand them out to fat cat bankers.
When the applied doppelganger to Tuesdays action dropped down several points it raised the ante – or the potential difference in scale between the two charts. Seems more likely the current chart is running on a scale of maybe 3:1 larger than the original.
The yellow circle could be this is where you are… The move on the left still has five points before it tops out, if we scale that to 15 from our current position that would take the price to 435.
The daily tells the whole story. 435 on the chart is above two line of solid resistance, Solid purple and dotted blue. To reach a convergence of the trend line where price sits currently, AND the projected number takes us to June 13. Not only do we have an objective we have a date. Price could reach that number sooner or later, or not at all.
What is the case for the downside? Money flows are stair stepping lower. I had to go to the 5minute because the 1 minute was giving me a skewed read. I said late Tuesday that the large spike in buying could have gone either way, and apparently on the longer time frame charts it did. With price sitting on a matrix of support and trend lines, the Bulls need this to hold. I can see a rally even after price drops below that trend line tomorrow. the momentum seems to be in place, but keep in mind these last two down days are less than a 1% drop.
Yields popped at the short end today. That’s a bit disconcerting. The benchmark yield curve yc2yr, after inverting briefly, gives forth the feeling that there is a second shoe to drop and this one will leave it’s mark on the economy. At the rate of two points of spread a day that’s only about two weeks before the 25 point difference is zero. Maybe Crude Oil has topped maybe Silver is setting up for a bear trap maybe (maybe not). And of course the FED wants to raise rates and cannot.
That with 2 trillion a day in Reverse Repo which is a gadget to put a floor under short term rates, and that tends to work on the entire financial economy, not just the charter banks. Even WITH 2 TRILLION they barely have a floor in place, and they cannot raise EEFR to the middle of their current range, much less the proposed range, what happens next Fed meeting? There’s the rub.
Yellen said she is sorry she missed the inflation warnings, she might as well throw in the 2008 financial crash. She missed that too. Makes me wonder of Powell will outlast her. And if Biden gets impatient with Powell he can elevate him to Treasury and appoint someone else. Going back to the Melt-Up, can you imagine this getting out of control on the parabolic side, and them trying to figure out what to do? S&P 6000, take a victory lap!