Insane S&P 500 Futures ChartThis is a weekly chart of the difference between the front month contract and the next contract in front for S&P 500 Futures. (Don't worry, you don't need to understand this lingo to understand this post, but if you'd like more information about what front month contract and next contract in front mean, I added links at the bottom of this post. To put it simply, this chart allows us to extrapolate what the market is currently pricing in for the future).
With that said, you may look at this chart and think it looks like just noise. You'd be right: it does look like noise, literally. Below is a diagram of actual sound waves.
These sound waves are from a human voice. The sound waves of a human voice always encode a message. Likewise, this futures chart has encoded an insane message...
To decode the message in this chart, let's first overlay a moving average. It doesn't matter too much which moving average you select, but I like to use the 20-period moving average because it's usually considered the mean for a given timeframe, and is the basis for the Bollinger bands. It will help us get rid of the extreme noise oscillations and allow us to just analyze the underlying price action.
Below is a chart of the 20-week MA applied to the chart.
It's hard to see the moving average, so let's now hide the noise and only show the moving average.
The chart is much cleaner and looks a lot different. Does it look familiar at all?
If we add the Fed Funds Rate it will...
As you can now see, it appears that this S&P 500 futures chart is a leading indicator of the Fed Funds rate.
However, we cannot go by looks alone and we should validate this hypothesis. We can do this by calculating correlation values. See the below chart.
It appears that the correlation values (R, R-Squared and P values) generally seem to validate the conclusion that this S&P 500 futures chart is a leading indicator for the Fed Funds rate.
Now here's where things get pretty insane...
We can use this chart to extrapolate how high the Fed Funds rate may go.
To get a refined look, we need to use a smaller moving average. Smaller moving averages can give us a more refined picture. To do this, I will drop the moving average down to the 5-week MA.
Here's what that chart looks like...
Look how high the 5-week MA is right now. Since June, it has exceeded the highs we saw in 2007, before the Great Recession when the Fed Funds rate was 5.25%.
Right now the S&P 500 Futures chart appears to be pricing in a Fed Funds Rate of about 6%. That's considerably higher than the 3.5% terminal rate currently predicted by the Fed.
With this said, the Fed is a free agent. It is not bound to hike to the level that the S&P 500 futures, as evidenced by this chart, may be pricing in. However, there's a cost to staying behind the curve: If the Fed fails to hike enough, inflation can spiral out of control with the expectations of further inflation amplifying the upward spiral. Companies raise prices in anticipation of higher inflation, workers demand higher and higher wages and the cycle begins to spiral out of control. Whereas, if the Fed continues to hike more and more aggressively to fight inflation at all costs, despite inflationary pressures being supply-related and not just demand-related, then it will destroy the flow of credit, and force massive deleveraging.
Regardless of which path the Fed chooses, a major economic downturn is virtually unavoidable.
Here are some references about futures contracts, for those who would like to read more:
www.tradingview.com
www.investopedia.com
ES2!
SPX 2001-2003 FractalBearish convictions:
-DXY (dollar index) is currently in a falling wedge (bullish) pattern sitting on very strong support around 100 -102.
Furthermore, while the DXY took a sharp dive, we did not see so much of a reaction in the SPX and across other equity markets.
-VIX (volatility index) is currently sitting at strong support around $18 - $20 with bullish divergence on MACD and RSI.
-If the Feds even so much as to mention a hawkish word about raising interest rates higher than 5% - 5.25%.
-Supreme Court will reconsider Biden Admin's student debt relief on February 28. This will decide whether student loans will resume 60 days after June 30th or not.
-Resuming student loan payments, along with a softening housing market will reduce consumer spending growth on goods and services. This would be good for inflation but overall bad for equity markets as consumers would be less likely to invest.
Not financial advice. Trade safely!
ES2This is the ONLY bullish count i could possibly think of here, retesting the bottom of the channel and then going to attack 4222 before the final drop.
Only bullish scenario i can think of. The market is f***** don't be long yet.
$spy at topCME:SP1! AMEX:SPY CME_MINI:ES1! SP:SPX SP:SPX
the writing is on the wall we will fall from .6 or .7
Use ES RSI / Price divergence to predict US stock market crashUse ES weekly chart RSI /Price Divergence to continuously monitor US market and predict the crashing timing.
S&P500 ES (between 10-Feb-20 and 18-Sep-20) RSI diverged from price.
Indicating the beginning of US stock bearish market??
Long the Market - Holding and looking to add ES1 SPX SPY The most common tweets I'm seeing this morning are "yesterday's/overnight lows should be re-tested" and "sell the rally at xxxx level."
Feels like the more uncomfortable trade would be to hold (or add to) my longs from yesterday. So yeah, that's what I want to do
SPX - Cautious/Neutral as Rally and support breaks$SPX has broken rally and first levels of support. After being bullish from May 31 until late July, a few weeks ago I pointed to 2,940 in my weekly-email as a level where I might get more bearish and we're right there now.
We'll see how the market closes, but unless it closes above 3,000 (unlikely) I'll be cautious for a few weeks. Cautious doesn't mean I'm expecting any kind of crash. In fact, I'd expect a grinding pullback or sideways decline, and then a buyable dip.
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Trend change?Well, turns out we dropped through Friday's -3 VWAP stdev extension against the long trend. Happier to look for shorts again...because this is quite often a sign of a trend change.
Going into tomorrow, I'm after shorts in the orange zone, longs in the blue zone. I want to sell as close to 2913 as possible, and buy close to 2890. Of course like today, it might not get to the outlier zones and might just retest 2900ish from below before heading lower. Either way, I kinda want to see another stab at 2900 before hopping into shorts instead of doing it from where we closed.
As always, wait for price action support at key levels...don't blindly jump into a blender just because price hits certain key levels ;)
Cliff notes: buy in the blue zone, sell in the orange one ;)
Trade Idea: Short ES @ 161.80% Fib Level --> 2235-22401) 2338.75 represents 161.80% Fibonacci extension of the 2134 to 1802.50 move from May of 2015 to February of 2016.
2). Large put/call option open interest at 2250, 2325 and 2350.
3). VIX at sub 11 levels, 14 day RSI at 69, and SPX Shiller P/E @ 28.
4). Trade idea: Short ES_F @ 2335, S/L 2365, target 2255, risk $1,500 to make $4,000 per contract.
Stage 4 Decline Looking LIkelySince we failed to take out the recent 2150 highs during the last rally a Stage Four Decline looks possible. Historically this would lead to a deeper retracement than stages 1-3 possibly to the 1730 area.
ES SPX AnalysisEs is very far away monthly demand zone (1959.25-1794.75) but inside of a weekly supply zone (2105.25-2079.75). However it just created a daily original demand zone at 2091.75-2073.50.
In these conditons, we are inside of a weekly zone where previously sellers had their strenght but the daily original demand zone may give us a difficulty going downard.
We can follow 2 scenarious here;
1- Black: if the price manages to break above weekly supply zone, we can be willing buyers at original daily demad zone
2- Red: if the weekly zone gains momentum towards south and manages to break below 2073.50, we can look for a newly daily supply zones being formed to become a seller.
tradewithcan.blogspot.com.tr
twitter.com
SPX 15MIN: 15min original demand long -aggressive-H1: We have an H1 original demand zone below (yellow box)
15MIN : There is a 15min original demand zone inside of an H1 zone (green box)
TP1: 1:1 R/R
Good luck!
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ES H1: H1 original demand zone UPDATE TP1 HIT WITH PROFITTP1 : 1:1 target hit
TP2: i will be trailing till the 2nd target above
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