Mptrader Out Front: Thursday February 6th, 2020

Yet Aother Overnight Bullish Algo Attack--  at 8:30 PM ET, after the Chinese Government announced that it will cut in half $75 billion of retaliatory tariffs imposed on US goods entering the Mainland. The headline triggered algo buy signals that instantly goosed S&P e-Mini (ES) futures from 3335 to a new all-time high at 3347. The index subsequently climbed to an overnight session high at 3357.75 (see attached chart) satisfying my next optimal upside target zone of 3350/60 discussed in my final post last evening.

Although some might suspect that the fallout from the Coronavirus must be having a very negative impact on the Chinese economy for "The Party" to decide to halve retaliatory tariffs on US goods, thus further compromising global growth prospects, the algos don't have the ability to "interpret." They just react to headlines that are positive for the US.

For the fourth consecutive overnight session, the algos have had positive headlines to react to-- People's Bank of China liquidity injections to cushion the impact of an unfolding growth slowdown, a premature story about a vaccine to cure Coronvirus while the virus continues to spread, and lastly, China compelled to remove tariffs, all have resulted in a machine-driven near 5%, three session, vertical price assault on what many market-watchers consider news that is hardly bullish. Go figure, right?

Maybe this bizarre straight up momentum market continues to elevate because Trump has cleared every hurdle placed in his path, and despite them, he has produced a strong economy and a very tight labor market in actuality and in perception, while the Democrats are struggling to find their identity and a unified platform other than Trump-hate. Just maybe, this rally is in anticipation of 5 more years of Trumponomics?

Back in my world of technical analysis, which continues to be trampled by the algo headline-machine buy programs on a regular basis, this morning we have an interesting divergence between Momentum and Price at new all time highs. My attached Daily Chart (overlaid with the Bollinger Bands) shows the big negative divergence (lower high) in RSI that usually serves as a warning signal that strength is nearing exhaustion. Couple the RSI non-confirmation with a price structure that at its overnight high at 3357.75 kissed the Upper BBnd Line, and well, the technical set up suggests ES should pause at the very least, and maybe actually correct a meaningful portion of this week's advance.

If a correction does gain some traction, ES needs to break and sustain beneath nearest support from 3335.25 down to 3330.00, which if violated, will point to 3300/05 (see my attached 15 Minute Chart).

Finally, I am keeping a close eye on MSFT today because so far, in pre-market trading it has NOT climbed above its prior all time high from yesterday at 184.25. In pre-market trading, MSFT's high is 182.39. If MSFT is unable to make a new high to confirm the benchmark indices, and instead declines, and breaks 177.00, this bellwether name could be telegraphing upside exhaustion. Last in MSFT is181.30

Consequential Economic Data This Week: Thursday: Initial Jobless Claims... Fed Head Kaplan Speaks... EIA Nat Gas Inventory Report... Fed Head Quarles Speaks... Friday: Employment Report for January... Baker-Hughes Oil Rig Count... Consumer Credit for December...

-- At Noon, President Trump will hold a press conference to discuss the impeachment fiasco (no doubt to take a victory lap after his acquittal)

Earnings 2 03 to 2 07 GIF
2 06 ES day w BBnds 815 GIF
2 06 ES 15 Min 830 GIF
2 06 MSFT 830 GIF
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