S&P 500 Futures are currently bouncing off the parallel channel bottom (see dashed blue lines on daily bar/range chart above).
As pointed out in yesterday’s post, the first key upside line to cross was yesterday’s low at 2820.50, which is the short-term range envelope bottom. That line is located at the bottom of the short-term range, which is highlighted in bright yellow on my chart above…
A cross above the short-term range envelope bottom at 2820.50 has generated a range bottom counter-trend buy signalwhere the most aggressive bears started to take at least partial profits (see screen capture from Stops and Targets above).
Next upside counter-trend price target, if this bounce can stick, is confirmed resistance at 2914.50.
Head’s Up! ES2820.50 is the line in play today for the S&P 500 Futures. Intraday price action is bullish above –> but reverts back to bearish below.
The Dow Jones Industrials opened the new week down -500 points on a futures-driven beat-down (S&P Futures opened down -50 points). This move piggybacks the setup going into last week’s FOMC rate announcement. This (in my opinion) is the pros doing their thing, post-FOMC, and so the game here is to figure out what they are targeting to the downside on this forced move lower.
The headlines blame this overnight beat-down on a counter-move by the communist Chinese to allow the Yuan to depreciate above 7 on the exchange ratio to the Dollar for the first time in a decade. This is China’s retaliatory move to counteract President Trump’s devastating (to them) import tariff strategy (which is Great for US). Key US exporters are leading today’s decline, of course, but if you are in the market to buy some cheap Chinese import junk, then the good news is your prices just dropped a bit. Ultimately, however, the Chinese will lose this battle as America holds all the economic ‘Trump’ cards. The Chinese continue to absorb the costs and effects of the transition, while the US continues to strengthens its economic base with increased domestic manufacturing. It’s a brilliant strategy and is being executed flawlessly.
It was inevitable that the collapsing Bush(2)-Clinton-Obama era strategy to weaken America, which is now coming unwound with a Make America Great Again economic squeeze, would eventually create some panic in their circle of accomplices/associates (and bribe suppliers). The global socialist strategy of impeaching/removing the outsider/disruptor (Trump) appears to have failed miserably, and so now we are seeing screeches and wild flagellations as the old ‘new word order’ (thanks Bush I) continues to come unwound. Good riddance, I say, but choking off this abomination won’t come easy and these people will stop at nothing in their attempts to maintain a rapidly-slipping grasp on their horrific vision of global socialism/communism–> where a tiny cabal of global overlords prospers (them) while everyone else (us) suffers.
So, let’s take another look at where we are, technically, after losing bullish support in all three timeframes…
Stops and Targets shows a Bear 4 rating for the S&P 500 Futures and 2,955.50 is long-term resistance.
Next S&T major target lower is 2,732.75, which is nearly 5% lower as I write.
So, here is how the pros likely will trade this decline (in my opinion)…
The key numbers going forward will be the previous day’s low and high. In a decline, the first counter-trend buy will come on a cross back above the previous daily bar low. That might be unlikely to happen today (2,913.50 was Friday’s low), but if not today, then it will eventually happen on a subsequent day. A cross back above the previous day’s low (in a downtrend) is where the most aggressive bears will start to cover at least partial profits.
If/when we get a day where a rally crosses back above the previous day’s high, then the most aggressive bears will be getting completely out of short positions and the momentum bulls will jump in on the trend change to double up buying volume.
So, remember to watch the current short-term range envelope numbers for those eventual crossovers for a clue when the reversal starts. Reread the first sentence of this paragraph and remember that–it’s very important from this configuration!
This ‘feels’ like a forced/planned correction to me since there were no unanimous spotter signals triggered at the top, but it’s fully-bearish here until it ain’t and the previous day’s low is the first line that must be crossed to potentially start to flip the momentum.
Remember also that our Weekly Bar Paradigm ‘hard deck’ is currently sitting at 2,732.75, so that’s the edge of the wiggle room for a significant correction before this pullback/decline potentially turns into something much more ominous.
The previous bullish trend change numbers after the last major pullback were at: 2,845.25 (intermediate), 2,767.75 (short-term), and 2,722.50 (long-term). Those are the full trend reversal/breakout retest targets lower.
A big fist bump here to all my bearish friends who caught this downdraft entry from the setup in my last post at 3,001.50! Keep an eye on the short-term (daily bar) range envelope as explained above.
Today at 2 PM ET we will get the FOMC meeting announcement, followed by a press conference at 2:30 pm. A rate cut of 25 basis points is expected. This is also the last day of the month, so head’s up post-announcement for possible market antics from the pros.
This is also a good time to check on the current status of the broad market, using the S&P 500 Futures…
A quick glance at Stop/Reverse lines and Range Envelopes at stopsandtargets.com shows the S&P 500 Futures currently hovering near the short-term stop/reverse line at 3015.50 with intermediate support at 2972.50 and long-term support at 2848.50.
The short-term and long-term timeframes are both rangebound with a bullish bias and the intermediate timeframe is currently trending bullish above 2972.50.
Let’s take a closer look at each timeframe using my charts to correlate with Stops and Targets’ analysis…
The monthly bar chart above does a great job of summing up the Big Picture. We can see the last higher monthly low occurred in April at 2848.50 and has been the epicenter of the games that have followed since…
In May, the pros started off by popping the last remaining bear stops above the April high and then viciously drove the market down beneath the April low (generating a long-term sell signal under that line) where the bulls were forced to capitulate at month’s end. That was outside bar number one.
In June, the pros covered their May short trades and doubled the buying (to first cover shorts and then to re-accumulate long) and forced the market all the way back above the May high to again force bears who missed the turn at the counter-trend buy signal to capitulate. That was outside bar number two in an extremely rare back-to-back configuration that I discussed extensively in my last post.
In July, the pros gapped the market up above the June high on the first day (and above key resistance dating back to September 0f 2018) and here we are on the last day of July waiting to see how it goes post-announcement and what final shape the bar will assume on the close today.
Typically, a gap and trap above key resistance leads to a breakout run to the upside–but this market has been anything but ‘typical’ recently, so that’s the reason for a little head’s up here–just in case.
Bottom line… it’s all good for the long-term bulls above last month’s high of 2969.25. A break below would trigger a long-term counter-trend sell.
It seems highly unlikely that price would decline today below the current long-term stop/reverse line at 2848.50 and so if the monthly low at today’s bar close ends up higher than that line then we will see the long-term Stop/Reverse line move up to the July low tomorrow (currently at 2955.50).
Next, let’s zoom into the intermediate timeframe…
The weekly bar chart above shows us to be currently in the eighth bar of a sequence of higher weekly lows in a trending market that began with a Stops and Targets intermediate buy signal at 2845.25 on June 6th.
It’s all good for bulls with current profits locked in above last week’s low of 2972.50, which is Stops and Targets’ intermediate stop/reverse line, but watch out on a break below.
The weekly chart is also where I track the Weekly Bar Paradigm (WBP) that I have been pointing out with regularity here since the 2009 low. Note that the most recent higher 4-bar weekly pivot low was created at 2372.75–> so that is the new ‘hard deck’ for WBP followers. That amazing bullish paradigm that has been in play since 2009 will not officially end until we eventually see a break below that last higher pivot low that cannot be subsequently recaptured–and then is followed by a series of lower weekly highs (to start a weekly bar bearish paradigm).
*The last paradigm entry buy was at stop sweep/reversal under the previous pivot at 2616.50 which then bounced almost perfectly at the very long-term trendline in December of 2018 at 2326.50. The trailing stop for that WBP entry is now advanced to to last higher pivot at 2372.75.
Pretty cool how all of that works, don’t you think?
And finally, let’s take a quick peek at the daily bars to put it all together…
The daily bar chart above shows all three timeframes with the range envelopes for each.
The short-term stop/reverse line at 3015.50 is set at yesterday’s low. Note that yesterday we had an outside bar where the pros took the stops both above and below the prior days’ range. They were getting set up in advance of today’s announcement, most likely.
If we were to see a negative reaction after today’s announcement then the first short-term sellers would come in on a break below 3001.50 (yesterday’s low). First downside target would be old breakout resistance at 2965.25. If the selling continued, then we would expect the short-term stops under 2914.50 to be the next target if things got r-e-a-l-l-y crazy (highly unlikely, but ya never know).
The more likely post-announcement scenario, of course, would be a continuation of the upside breakout, and if that happens there is no resistance above 3029.50 as the market would be creating new all-time highs.
So, let’s see what, if anything significant, happens after today’s FOMC hoopla. As mentioned before, bulls are all good above the Stop/Reverse lines–but if we start to see significant selling then be careful–especially under 2972.50!
*New Symbol Lists at Stops and Targets!
With the completion of the annual Russell Index Reconstitution there have been additions and deletions to the official list of symbols available for analysis. For full details of which symbols were dropped and added and why, follow this link (it’s an interesting read):
Stops and Targets has created a new custom symbol list that allows us to request the addition of new ticker symbols to be added to the analysis database. Those non-Russell 3000 symbols will not be included in end of day analysis reports but they will be available for analysis and able to be added to custom Watchlist notifications. (ticker symbols must be traded in US markets)
To request the addition of new symbols, send a message to me using the ‘Send Comments’ link and I will pass it along.
Today is quarterly ‘Quadruple Witching Day’ when equity options and futures, and index options and futures all expire on the same day. As is often the case, the market has been wild leading up to expiration as the pros undoubtedly look to maximize their leveraged gains, while minimizing the gains (and maximizing the losses) of those unfortunate souls sitting on the other side of their positions.
In a previous Big Picture post, I mentioned that the monthly bar structure was bearish at the time, with a lower high and lower low, and I commented that the odds favored the month (June) staying that way. The reason I wrote that without much hesitation at the time was because we had just seen an outside bar on the May monthly bar, and as I will explain below the odds greatly favored my assumption.
An outside bar is when both the high and the low range exceeds the range of the previous bar. For example, The April monthly high was 2960.50 and the May high was 2965.25. The April monthly bar low was 2848.50 and May low was 2754.
Professional traders HATE outside bars in any timeframe. Why, you might ask? Because nearly every trading strategy is challenged under such circumstances.
Let’s take the May bar for example:
The first victims were the bears. At a new all-time high, there was not one single bear on the planet with a profitable position on ES. The bears had been squeezed into total capitulation.
Once a pullback started, many bears were likely initially afraid to chance a counter-trend move down from the top. Note here that Stops and Targets nailed that start down with a Top Spotter and a counter-trend sell on the range envelopes. Those without S&T, or those without trust in the signal would have found it very difficult to engage psychologically at that point. The pros are great at beating people up who are right on an idea but early in implementation.
Next to be abused were the momentum breakout buyers who were overrun on the quick move down. Those who didn’t cough up positions that may have been in the green at the previous close–but bright red (especially after a gap down open on individual equities)–often paid a terrible price.
Then next came the range traders who bought the dip to support. They also got a big surprise to the downside, just like the momentum guys.
Following next were the bullish trend followers who saw big paper gains evaporate when their trailing profit stops were activated. Fortunately for many they still had profits from diligently moving the stops higher to lock in gains. Still, it is never fun to watch the numbers dwindle–even when it is a net gain at the end.
Those bulls who hung on expecting a bounce that didn’t come when they expected it, watched profits turn to losses–sometimes BIG profits turn into BIG losses if they failed to react in time. Many of them ultimately succumbed to the intense squeeze pressure to the downside when the losses reached the ‘uncle (or max pain)’ point.
Then the tables suddenly switched and in reverse order the bearish breakout sellers saw their position reversed and the winners to the downside suddenly had the exact same thing happen to them as their bullish counterparts. Bearish winners turned to losers and the upside squeeze has been intense ever since.
Often, the ONLY traders who do well in an outside bar are the countertrend traders who buy the stop sweep/reversals and then target the other side of the range. Note that Stops and Targets signaled every one of those counter-trend entries.
Summation: Outside bars suck for just about everyone–but the stop/reverse lines at Stops and Targets can help to override the powerful instinct to fight against what is happening, but only if you let them.
Outside bars work against every logical human instinct and my guess is there are a few heads nodding in agreement out there right about now. If you’ve had a tough month (or two) in the market–don’t feel too bad about it. You likely have a lot of company out there. This is by far the toughest environment to trade in–and if you have done well then you should be very proud of yourself for a job well done.
So with all that said, let’s dig a little more deeply into the monthly outside bars phenomenon on the S&P 500 Futures…
Outside monthly bars are by themselves relatively rare on the S&P 500 Futures. In the entire history of the contract, dating back to its inception 1999, there have been only 29 outside monthly bars out of 240 total months.
Note that more often than not, an outside bar favors the direction away from the stop sweep/reversal.
I have marked all outside bars with blue dots on the chart above. The last time we had one was was back in November of 2016 (US Presidential Election month). So, the appearance in May of an outside bar was certainly a long time in coming. It is/was a noteworthy event and definitely worth pondering going forward as i will explain below.
As I type, however, the June monthly bar just did something VERY RARE INDEED! We now have a June bar range that exceeds the May bar high and low… so we have just experienced back-to-back outside bars on the monthly S&P 500 Futures contract!
How rare is this you ask? …well, so rare that it has only happened once before in the entire history of the contract (240 total months)…
The chart above shows the only other previous occurrence of back-to-back monthly bars on the S&P 500 Futures. It happened way back in June and July of 2007.
In what might be worth considering–that double outside bar happened near the end of a blow-off top during the Bush administration rally that had been underway since the 2002 bottom (eventual stabilization after the 9-11 terrorism attacks against America).
After the pros finished distributing and repositioning in 2007, they absolutely drove the market into the ground to prepare the stage (in my opinion) for the unveiling and the intentional installation of their ultimate global socialist stooge, and the worst president this country has ever had. (Too harsh, I briefly ponder to myself? Nah, run with it, I decide…)
Warning: those with delicate social sensibilities might want to skip the rant section that follows… 🙂
In what is somewhat reminiscent of the bathroom scene from the movie Trading Places where the scheming brothers had a one dollar bet that they could take the lowest human they could find and make him look successful… and furthermore in what perhaps was the biggest FU to average American citizens of all time, the globalists hand-picked a truly repulsive and imminently unqualified individual, whose name was eerily similar to the most hated man of the time (Osama Bin Laden) and they made him President using the immense (at the time) power of their captive globalist media.
Had there been no President Obama, there never would have been a President Trump. And such will be a similar ultimate real-life consequence for the arrogant globalists, one hopes, as it was for the brothers in that movie.
The election of Donald Trump in 2016 was the average American’s giant FU right back to the globalists… who clearly, were absolutely stunned and enraged at the devastating and previously unforeseen threat to their global dictatorship fantasies (and also fearing looming future incarceration perhaps).
Obama wasn’t alone in his audacious betrayal of America. The list of perps is long and absolutely includes (in my opinion) the invisible hand that guides the markets. Those folks have everything to lose if their globalist scheme to subjugate and destroy everything America stands for ultimately fails.
Those globalist folks absolutely loathe and fear President Donald Trump–and so it wouldn’t surprise me one bit if the powers that steer the market ultimately try to implement the same market beatdown tactic on President Trump sometime in advance of the upcoming 2018 Elections.
The giant multi-national corporations that have run the show (into the ground) are the sworn enemy of economic nationalism. They absolutely must defeat what Trump stands for in order to restore their plan. His biggest current bragging right is American prosperity as a result of globalism’s dramatic retreat under his common-sense policies. They have tried everything in their bag of tricks to stop him, but have failed miserably, so far. They NEED the American economic prosperity to be upended–but Trump has skillfully boxed them in by taking away many of the weapons previously used to undermine American workers and American industry. Now, either they invest in American prosperity or pay the stiff tariffs to finance their opposition.
It is an absolutely brilliant strategy. I think President Trump is giving the globalists an opportunity to join the party–and those who do will ultimately prosper, but those who don’t will suffer greatly. Ask the Chinese how they are enjoying bearing the brunt of the economic consequences. Other countries and companies are carefully watching to see the outcome of this epic battle.
So, do you think with all that is at stake (trillions of dollars) there isn’t a real risk that we will see a last desperate effort to upend Trump’s major campaign centerpiece (the economy)?
Just a theory, of course, but something to continue to be watchful for. As always, Stops and Targets will provide the signals–we just have to be cognizant that if/when that time comes. It likely won’t ‘feel’ right to initiate the trades and to honor the stops. That’s what the past two months has given us a little taste for.
The double outside bar phenomenon of the past two months has been a great opportunity to critically self-evaluate trading discipline and technique.
My own personal suggestion is to trust the Stops and Targets stop/reverse lines when the going gets tough. Stops and Targets doesn’t ever ‘feel’ anything. It’s purely logical, and a great tool and trusted second opinion guide to have–especially when the pressure is on. If the Stops and Targets analysis isn’t agreeing with what you might be ‘feeling’ at the time, then seriously consider reevaluating the trade. It’s all there in the various S&T signals–trending, counter-trend, range trading, etc., with helpful risk management suggestions.
Futures Options have now rolled over from the June 2019 to September 2019 contract with a difference of +4 points from ESM19 (June) to ESU19 (September).
All previous chart numbers have been adjusted to reflect the new contract pricing—so, for example, the Long Term stop/reverse line from the expiring June contract at 2844.50 now becomes 2848.50, and so forth.