Signals & Trading Plan for Monday 1/27/20

The Lunar New Year is starting off with a sharp drop in the market.  There are certainly lots of potential catalysts for the sell-off on Fri Jan 24, including the coronavirus outbreak.  But this medium dip has been in the making for a while as you know, and it is due to something else entirely.   

It’s the Fed who’s spoiling the party!

The Fed giveth and the Fed taketh.   The short story is that the Fed is winding down their cash injection into financial system.   The original timeline was for the Fed to stop their repo operation by the end of January. But it is not entirely clear that they are going to accomplish this goal within January.  This Reuters article explains the issues facing the Fed and the repo exit more clearly.

But regardless of the exact exit date, the Fed is taking away the easy money, and in the process draining liquidity from all markets.  It is Fed-injected liquidity, the sloshing of easy money, that has been driving the stock market to a new high.   

There is a high probability that Surge10 will end, and Major Pullback4 will arrive, when sufficient liquidity is drained from the system.   There is also a high probability that Major Pullback4 will turn out to be the start of a new Down Trend in stocks.  

So, is Friday’s drop the start of Major Pullback4?  If not, when can we expect it? Read on. 

The full article covers:
Market Internal Indicators

• Volatility & complacency
• Market breadth
• Level of bullishness
• Overbought / oversold levels

Short-term Support & Resistance Levels

• For $SPX $NDX $RUT SPY QQQ TQQQ

Market Projections and Planning Your Trades

• For long-term portfolio
• For intermediate and short-term trades

Subscribe to read the full article.