02/08/2020 Weekend Update

[Cobra]

Up one week, the next week has 75% chance to make a higher high so bulls are not over yet.

[Al_Dente]

WORTHY WEEKEND READING:
If you’ve been following the cat fight between Zerohedge and Minneapolis Fed President Neel Kashkari, you will recall that Kashkari asked "someone" to explain to him "how swapping one short term risk free instrument (reserves) for another short term risk free instrument (T-bills) leads to equity repricing."
Zerohedge responded, explaining in great detail how the Repo market works and how QE4 works, concluding with (paraphrased from memory): Here’s the bottom line Neel: just have the FED PUBLICLY ANNOUNCE that they are ceasing all Repo support, and see what that does to equities within minutes of the announcement.

A few days later former Fed dude Bill Dudley wrote that the Fed's balance sheet expansion [QE4] has no effect on the stock market.

Finally, Wednesday, SMBC Nikko's Masao Muraki, formerly one of Deutsche Bank's most respected strategists, wrote the definitive report basically reinforcing everything Zerohedge has been saying.
The main highlights from Muraki's report are here: [Pasta likes Figure 8]
https://www.zerohedge.com/markets/here- ... to+zero%29

[Al_Dente]

Wednesday NDX (QQQ) was 3 standard-deviations above her 20ma which is extreme. It could move higher, but a mean-reversion is due ... soon

Also extreme is how far QQQ is above its 200ma … currently 15.86% above

Related is Jason’s message that I posted Thursday:
“Returns over the next 3 months were well below random for the Nasdaq and (especially) the S&P 500”.
https://sentimentrader.com/blog/half-of ... r-markets/

[Trades with cats]

Tom has put up an interesting explanation on what the McClellan Oscillator is currently saying. I think it is an important tool because of it's long track record. Also we are constantly reminded by Mr. Bachnut that it is excellent for timing longer term positions.
https://www.mcoscillator.com/learning_c ... scillator/

There is a big difference between a tool and a machine. A tool requires skill and practice to use, most can not just pick up a tool and get results. So when people say well you should have that in your traders tool chest that implies knowing more than what the name is and a general description.

[Al_Dente]

LEADERS update:
The “leaders” are looking weak. In fact, none have confirmed the SPX new high.
Daily

[Note revised chart: I replaced Banks with the Fang+ Index, because seriously, how can I have a “leaders” chart without the Fangs+]
The non-confirmation on the Fangs+ is soooooo tiny that if you sneeze it may confirm… nonetheless it is what it is...

[Al_Dente]

More on non-confirmation:
Since last July, the aggressive sectors have been confirming all of the SPX moves.
This month is different.
NOTE: THE SECTORS NEED TO CATCH UP, OR SPX WILL “CATCH DOWN”.
Can’t SPX just keep tagging up, pushed by $NDX (black) alone? Well sure, that’s what it’s been doing since July, but it had the support of the other sectors. Now it doesn’t. Something has to change.
One year chart, daily

[Al_Dente]

https://stockcharts.com/public/1684859

[BullBear52x]

From "It is what it is department" Key focus 2x top or Failed Breakout The gap and run up as fast as it was before Friday was suspecting but strong enough to over turned few bearish signals to bullish and by Friday all the short term internals are back in red again, this created confusing to many traders. the best analogy I see from here is July time frame, it is very self explanatory if it is or nor from here.

Fear is contained? I don't see this as calm market until it is moving back down under the MA

Short term trend is up, dip will be bought, I will be surprised if no more sell off from here based on 2x top counter trend and a daily sell the rip set up. as common knowledge a failed breakout will quickly retest the bottom range of 3200ish. for all that to happen the key support at 5 DMA is still intact, I will watch for the reaction there first. if gap down Monday under 5 DMA to start the week, I am sure 3200 is to be tested quickly, if 5 DMA giving a support it will tell me the sideways bullish consolidation will be with us for awhile. for now I am seeing more to the down side, Trade well, Peace!.

[Heck]

Up one week, the next week has 75% chance to make a higher high so bulls are not over yet.

Good call Cobra