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Tests of Deeper Support – 24 Aug, 2022

Today

Market Outlook- This could still easily be a ‘sell the rumor, buy the news’ event. A lot of traders continue to pile into the short side of the trade-and like a weeble wobble – it could easily turn and shift to the other side as the trade gets overcrowded. We showed supports down near 4112 and 4089-4078 as support lines below and pre-market we saw that 4110 was tested and bounced.

Market Temperament is mixed but largely bearish – if we continue to make newer lows, we shall assume the bear motion is not complete. If we begin to hold higher lows, we will need to press forward through resistance.

So how do we trade that? We short in the direction of trend at resistance and take profit at support using larger time frames to deliver motion. Once the higher lows present on the 4hr chart and we close above the 5dma, we will have the shift. Until then, it is level to level trading.

Here’s the MotiveWave chart for the ES_F

Trend is down but traders are focused on the prior supports giving rise to more support

Remember that portfolio managers have been caught flatfooted in the bounce and had been trying to get involved before the rejection of prices earlier, so it remains to be seen whether they will double down on this current cycle to lift prices. My suspicion is that they will. But only price will confirm direction.

I was watching some more macro motion information and many are wondering what triggered the sharp decline from the solid rise upward, and interestingly, someone has isolated a currency event that converges with the occurrence of the dip beginning.

A shift in the CNY rate from the PBOC – so now we watch for significant movement from the PBOC to see if this may happen again

Currency movements will affect commodity prices most significantly so it is important to see where these commodities lie relative to the political lines being drawn

Eastern blocs control the majority of the metals used to create alternate energies
The current dynamics show the strengthening shift of the Eastern Bloc

That said, let’s not jump to any conclusions here. The market is a Gordian knot and we all remember how Alexander fixed that problem (he cut through all the tangles with his sword, if you forgot). So the only way we have the ‘fix’ is through extreme disruption. Code words for civil unrest or war. In the meantime, I continue to think that the weeble-wobble we have here will send up to the upside once more.

What’s the takeaway? It is important to consider the macro – but we cannot trade the macro – it is too big and too complex for us to derive anything meaningful or even useful since we have a group of challenged world leaders intent on their own objectives.