As the entire world knows by now, China joined the rest of the world’s central banks in more “easing”, which sent markets into a spastic move higher. As you can see by this view of the NQ, this massively bullish news has not, as of yet, represented any kind of sea-change in the markets. Before the day was even out (again, in some, not all markets), the entire move up was reversed.
Yesterday morning ES tested the weekly pivot at 2035.5, and then SPX tested the 50 hour MA and then SPX was off to the races again. That 50 hour MA has held on five tests out of the last six trading days and until we see a break below it this uptrend is still very much intact. That first break below would normally also precede the main high, so that main high still doesn’t look close here. SPX 60min chart:
Well, the three remaining equity bears on Earth got their last hopes blow-torched overnight, as central banks continue to do what they do best – – – ease. China dropped interest rates (because God knows what’s holding the world economy back are the sky-high interest rates we’re all burdened with), and Europe decide to go Full Kuroda on their own “easing” (sending EUR/USD into a free-fall). Suffice it to say almost everything but the Euro – – crude oil, gold, equities – – is flying higher. Here’s the ES (including, for big laffz, the brief bout of weakness it had during the times of Ebola):
Early this morning, when the ES was down double digits, an esteemed Sloper made this remark:
Yesterday was the 24th consecutive close above the 5 day MA. This has only been exceeded by runs of 25 days in 1991 and 1987, though in 1987 one close on the MA might have been a whisker below. If we were to see another daily close above the 5 DMA then that would match the record back to 1980, and possibly for the SPX lifetime, as I’ve only looked back as far as 1980. This has been an amazing run. One thing I would note from the four longest runs since 1980 is that they all failed into modest bull flag retracements before continuing upwards. We may see this break down below the 5 DMA today and if we do, that’s worth bearing in mind. SPX daily 5 DMA chart:
Well the doji consolidation stats I posted yesterday gave 75% odds of a small retrace before (most likely) higher, but once again SPX took the lower probability path of the 25% chance of breaking up. It was a clear breakout candle so I have looked at the four of sixteen of these from the start of 2009 that broke up and the following days for these played out as follows:
– Trend up day on day 2 for 1.5% gain. Short term high slightly higher on day 3
– Modest gain on day 2. Short term high on day 4
– Modest gain and short term high on day 2
– Inside day in upper half of breakout candle on day 2. Short term high on day 4
Now this is only a sample size of four, but the lean is clear. These stats are suggesting that yesterday did not make a short term high, and that that a short term high should be made from today through Friday, and could be as much as 2% higher. Three out of the four closed green on day 2, and the fourth close was only slightly below the breakout candle close. The lean coming into today therefore needs to be bullish, though with the expectation that there should be a short term high this week that should then retrace into (75%) or near (25%) the doji consolidation area that SPX just broke up from. (more…)
Tonight I’m going to forego the usual quest for thin reeds on which to hang the equity bear case, and instead offer up reasons why all hope is lost for now. So here goes…..
First, the Dow Jones Composite has penetrated and successfully tested its former resistance line. This resistance is now acting as support, as illustrated by yesterday’s test of the line and today’s acceleration up and away from it.