Market Update and MAJOR Upgrade to Stops and Targets

Let’s take a quick peek at the current broad market configuration using the S&P 500 Futures Options as a proxy.

There has also been a MAJOR upgrade to Stops and Targets and I’ll use this post to show you how that update now dovetails perfectly with my charts that I often display here.

 

 

click on image to enlarge

 

Let’s start by looking at the monthly bars. The monthly bars are used by Stops and Targets to classify the ‘Long-Term‘ timeframe.

On the chart above, each candlestick bar represents the open, high, low, and close for one-month trading periods dating back to the 2009 Bear Market bottom.

Note that the current active bar (April 2019) has both a higher low and a higher high than the previous bar (March 2019), which had a high-low range of 2726.50 to 2866.

We see the same trend dating back three additional bars which creates a sequence of four consecutive higher lows and higher highs.  That is the very definition of a bull market trend… ‘ a sequence of higher highs and higher lows‘.

 

 

The previous monthly bar is what determines the current ‘long-term range envelope’ that is displayed on the Stops and Targets summary analysis page (see the screen capture above) for each tracked symbol.  To make it easy to find the long-term range I have circled that range envelope and drawn arrows to the corresponding long-term range marks on the summary bar chart.  A small gold ‘ L ‘ marks the top and bottom of the long-term range envelope.

So, ‘long-term‘ in Stops and Targets always refers to the monthly bars and the monthly bar trading perspective of professional long-term investors.  See how that works?  (That’s very important to understand, so please re-read the previous paragraphs, if you need to, before moving on).  If you still have questions, then feel free to ping me at the ‘send comments’ link at the top of this page and I’ll address those.

The long-term range envelope is updated at the start of each new monthly bar, so the latest long-term range envelope update occurred yesterday on 1-Apr as the new April bar, now in the second day as I type, began trading.

So, taking my chart together with Stops and Targets, we can see that the long-term is currently trending bullish (that is what the little green arrow means right next to the long-term range envelope).  The long-term (monthly bars) turned bullish on 12-feb-19 and has advanced +5.66% so far.

We can also immediately see that the long-term trend would reverse to bearish on a cross below the long-term Stop/Reverse Line, which is currently at 2726.50.  The Stop/Reverse line will always be the same as a range bottom (or range top when bearish) in a trending market.

The reason that Stop/Reverse lines are so important is because that is where stops tend to congregate for traders in a particular timeframe.  In this example, long-term professionals are going to be trailing profits stops at or just below the Stop/Reverse line because that is equal to the previous monthly bar low.

Pretty cool how that all works.

 

 

 

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Next let’s take a look at the weekly bars for the same symbol on the chart above.

Stops and Targets uses weekly bars to classify the ‘intermediate‘ timeframe.

On the chart above each candlestick bar now represents the open, high, low, and close of one week of trading for the S&P 500 Futures Options.

Note that the current active weekly bar (April 1 to April 5) has both a higher low and a higher high than the previous weekly bar (March 25-29), which had a high-low range of 2,789.50 to 2840.75.

We see an intermediate trend sequence dating back one additional bar from a bounce off the intermediate Stop/Reverse line two weeks ago.  Note that I have drawn in the historical location of the Stop/Reverse line as a color-coded line that looks a lot like a moving average (but is quite different) to the untrained eye.  The trend bias was intermediate bearish under that (red) Stop/Reverse line and is currently bullish above 2805.25.

 

 

That previous weekly bar is what determines the current ‘intermediate range envelope’ that is displayed on the Stops and Targets summary analysis page (see the screen capture above).  I have circled the intermediate range envelope and drawn arrows to the intermediate range marks (a small gold ‘ I ‘ marks the top and bottom) on the summary bar chart.

The intermediate-term range in Stops and Targets always refers to the weekly bars.  See how that works?

That range is updated at the start of each new trading week, so the latest intermediate-term range envelope update occurred on Monday, April 1st as the new week that ends on Friday April 5th began trading.

Because the last weekly bar low (2789.50) was not yet higher than the intermediate Stop/Reverse line (currently at 2805.25) the stop/reverse line remains where it was last week and is still inside of the intermediate range. When the stop/reverse line is not equal to either the bottom of the range (trending bullish) or the top of the range (trending bearish) then the symbol is inside of a trading range and that is what the sideways arrow symbol means next to the intermediate range envelope.

If the current weekly bar low of 2844.50 were to hold through the close on this coming Friday, then the intermediate Stop/Reverse line would move up to that higher low on the following Monday and the sideways arrow would be replaced with a trending arrow like in the long-term timeframe example above.  See how that works?

The Stop/Reverse line for each timeframe only moves when a trend develops–and then once price eventually crosses back under (or over) that line then we will see a ‘stop’ and a trend ‘reversal’ signal.  How that all works is very clever.

The intermediate trading bias turned bullish on 11-Mar-19 and has advanced +3.30% so far.  (That information comes from the trend table on the same summary page).

Again, the reason that Stop/Reverse lines are so important is because that is where stops tend to congregate for traders in a particular timeframe.  In this example, intermediate-term professionals (swing traders) are going to be trailing profit stops at or just below the intermediate Stop/Reverse line because in this range-bound example, that is where the last higher low occurred (weekly bar of 22-Mar).

 

 

click on image to enlarge

 

And finally, let’s take a look at the daily bars for the same symbol on the chart above.

Stops and Targets uses daily bars to classify the ‘short-term‘ timeframe.

On the chart above each candlestick bar now represents the open, high, low, and close of one day of trading for the S&P 500 Futures Options.

Note that the current active daily bar (today, 2-Apr) so far has both a higher low and a higher high (just barely) than yesterday’s bar (1-Apr), which had a high-low range of 2844.50 to 2873.50.

We see a short-term trend of higher lows dating back four bars from a bounce on 25-March off the intermediate Stop/Reverse line.  I have again drawn in the historical location of the Stop/Reverse line as a dashed color-coded line.  The market was short-term bearish under that (red) Stop/Reverse line and is currently bullish above 2844.50.  If today’s low ends up greater than the short-term stop/reverse line, then that line will move up to today’s low once the next day starts to trade.  That is why narrow range day often lead to wide range days because the professional trading algorithms are triggered when those range envelopes are crossed.  Again, it’s extremely important to understand that concept to get the most out of what Stops and Targets is telling you.

 

I have also drawn in the intermediate (thin solid line) and long-term (thick solid line) stop/reverse lines along with support and resistance targets on this chart.  This layering technique helps to show how Stops and Targets brings multiple perspectives into play when determining the multitrend rating.  It also shows overlapping timeframe strategy decisions and is all mirrored on the summary tab.  Note that the stop/reverse lines are currently at ST = 2844.50, IT = 2805.25, and LT = 2726.50.  Because last price is > ST and ST > IT and IT > LT we have a fully-bullish BULL 10 multitrend rating and that will remain so until price eventually crosses below the short-term stop/reverse line (which would change the rating to BEAR 1).

 

This new MAJOR upgrade to Stops and Targets core logic engine now brings all three timeframes into what S&T calls ‘aggressive mode‘, which is theoretically the fastest possible response time to a trend changes for each (monthly, weekly, daily bar) timeframe.

I have been using an advanced beta version of this software upgrade for several weeks and absolutely love it.  With the range envelopes now being equal to real-time monthly, weekly, and daily bar high-low ranges, it just doesn’t get any easier to set following stops (for when a trend eventually changes at a stop/reverse line) and to easily determine partial profit exits as calculated targets are hit (often stops being run at range envelope edges).

 

It’s all good for bulls until price eventually crosses back under the short-term stop/reverse line.  Once that happens, the next set of targets flip to intermediate, and then to long-term.  Once the entire sequence runs its course then we eventually get a trending move exhaustion …and that is what top and Bottom Spotters are all about.  That is exactly what happened at the last major Bottom Spotter on December 26, 2018… and we could be getting nearer to a potential Top Spotter that will come when this current move is exhausted.

*Note that price is closing in on the last line of confirmed resistance at 2879.50 shown on the daily bar chart above.  That line is left over from the first major long-term sell signal (when support was broken) from the previous market top in September of 2018.  So, let’s keep a close eye on things right in this area to see what happens as that major resistance is approached.

The example shown above is for the S&P 500 Futures Options, which are a great proxy for the overall market trend–but the steps for trade entry, risk protection, and profit-harvesting are exactly the same for any of the thousands of tracked symbols from Stops and Targets.

…my .02

 

 

 

Options Rollover Day

 

Futures Options have now rolled over from the March 2019 to June 2019 contract with a difference of +5.5 points from ESH19 (March) to ESU19 (June).

All previous chart numbers have been adjusted to reflect the new contract pricing—so, for example, the Top Spotter from the expiring March contract at 2819.75 now becomes 2825.25, and so forth.

 

 

 

click image to enlarge

 

In my previous posts I pointed out that the target for the push up from the powerful Bottom Spotter low in December was most likely going to be the descending top rail of the long-term range envelope.  For the expiring March contract, that target was 2818.  With today’s S&P 500 Futures Option rollover to the June contract, that target converts to 2823.50 (+5.5).

…the Top Spotter signal was generated at 2825.25.  Smiling Face With Sunglasses on Apple iOS 12.1

 

So, here we are today at quarterly rollover (after one of the greatest 3-month rallies ever!) now watching to see if the Top Spotter will be confirmed by a daily bar close beneath the spotter signal bar low, which was 2773.

That is the line in play now.  A close below would confirm the spotter and the next likely major target lower would then become rising intermediate range envelope support, which is currently at 2686.25.

 

 

click image to enlarge

 

While not quite as impressive a number of Top Spotter signals (1015 total active) that we saw at the corresponding December Bottom Spotter low there are, nonetheless, quite a few Top Spotters showing up in the Russell 3000 stocks (see screen capture above).  A direct link to the image above is here at Stops and Targets.

It’s all about 2773 today, as we watch for a possible Top Spotter Confirmation.

…my .02

 

 

 

 

 

 

 

Market Update

 

 

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Just a quick update this morning…

In my last post I pointed out the next two major upside targets, 1) the open gap at 2794.75 and 2) the trove of bear stops sitting just above the top of the long-term range envelope at 2818.

  1. Yesterday the gap was filled at 2795.75 and we got some selling due to profit-taking there.  Traders know that gap fills are often reversal areas on the S&P 500 futures –so that is what happened yesterday, and likely has some fingers poised and waiting above the sell button.
  2. Today we have a bounce off the short-term stop/reverse line at 2773.25

If this bounce holds,  that could bode well for the pros to ultimately push up and into the treasure trove of bear stops above 2818.

So to summarize… it’s all good for bulls above yesterday’s low at 2764.25.  A failure of yesterday’s low, however, could bring in aggressive new selling.  A new push above yesterday’s high at 2798, on the other hand, and the big stop-run target above 2818 could be a lock.

…my .02

 

 

 

 

 

 

 

Market Update

 

 

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Stops and Target’s Range Envelopes are great!  😎

In my last post I pointed out that a range breakout was likely coming.  Take a peek at the two images above and focus on what happened afterwards…

On 06-Feb there was a countertrend pullback alert at 2737.75.

On 08-Feb price pulled back from that signal to touch the bottom rail of the short-term range envelope.  See the green arrow () on the chart above and also the shaded yellow highlight on the Stops and Targets screen capture above the chart.  On that date, the short-term range envelope bottom rail price was then at 2685.50.  We had a pullback that poked just below to 2680.75 and then we got the bounce at the Stops and Targets short-term range envelope buy signal toward.  The next target higher at the time was the short and intermediate top rails at 2737.50.

As I type, price has achieved that initial target and now is breaking out above 2737.75.  No doubt, the pros are taking full advantage of bear’s buy-to-cover stops which were resting just above that line.

As I mentioned in my last post, the next major upside target now becomes the descending long-term (LT) range envelope top rail, which is currently at 2822.  Above that line sits the absolute mother lode of resting bear stops, which provides guaranteed buyers (as bears would be forced to cover massive short trades incurred below).

Just below the LT range envelope top rail is an open gap at 2794.75.    If this current push continues higher after the first level of bear stops are digested above 2737.75, then the open gap and LT top rail would undoubtedly be the next major upside targets.

Note that both the short-term and intermediate range envelopes have hooked higher into a bullish ‘V’ formation as new higher range tops are set and the bottom rail follows price higher (higher highs and higher lows).

The long-term range envelope is still rangebound with a bearish bias () and has yet to trend.  To do so would require the range envelope high to descend below the current long-term stop reverse line at 2782.75.

That all agrees with Stops and Target’s BULL 3 multitrend assessment shown in the top screen capture.

To keep the current configuration simple, I have shaded the two key numbers to watch on the Stops and Targets screen capture… bulls are good so long as price remains ABOVE the rising short-term range envelope bottom, which is currently at 2680.75.  The next target higher is the descending long-term range envelope top, which is currently at 2822.  Easy peasy.

The whole dynamic will change if/when price breaks under the rising short-term range bottom.  If/when that happens, the next major target lower would be the rising intermediate range envelope bottom rail, which is currently at 2567.25.  See how all of that works together?

…my .02

 

 

 

 

Market Update

 

Stops and Targets is currently showing the E-Mini S&P 500 Futures Option (see screen shot above) is rated BULL 3, which is the second stage of an intermediate rally within the context of a long-term bear market.  As we oscillate inside the current very small range it occasionally flips to BEAR 8, which is a short-term pullback in an intermediate bull market.  There is indecision here awaiting resolution, but that will likely change very soon as I will explain below.

Let’s take a quick look at where the market is at currently–starting from the monthly bars and then working back towards the daily bars to get a feel for all three major timeframes…

 

 

click image to enlarge

 

The currently monthly bar (January) is painting as an ‘inside bar’, which means we have a lower high and higher low against December.  With two more trading days to go in January, the highest probability is to stay as an inside bar, which could set up February for the first ‘monthly buy’ signal (on a cross above the January high).

Although the market has been rallying hard from the VLT trendline bounce and Bottom Spotter at 2316.75 we still see a bearish progression of lower highs and lower lows on the monthly bars.  As mentioned in the paragraph above, that pattern could be broken with a new higher high in February–but for now, the pattern remains bearish in this timeframe until/unless we see a new monthly higher high in the future.

Note that the monthly bar chart correlates well with the Stops and Targets assessment.  It’s still a long-term bear market, but the top of the long-term monthly range has been descending (currently at 2822, down from 2951 top) as the long-term range bottom (2316.75) holds.

 

Next, let’s take a look at the weekly bars

 

 

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The chart above shows weekly bars, and is very interesting…

It shows the current status of The Weekly Bar Paradigm…. which, to refresh for newbies reading here, simply states that so long as new higher 4-bar pivot lows are building on the weekly chart–any pullback that dips below the last 4-bar pivot low and then crosses back above is a ‘stop sweep/reversal buy’.

The 10th instance of that very powerful paradigm, which has yielded perfect entry points since the 2009 bottom, has just occurred at the recent low with an ensuing rally back above the last higher 4-bar weekly low pivot at 2607.

The time will eventually come when price cannot recover and hold back above the last four-bar pivot low.  When that happens the glorious secular bull market that has been roaring along since 2009 will have officially ended and I will be sure to point that significant reversal out right here.

My definition of a bull market in any analysis is simply ‘higher highs and higher lows‘.  When the current secular bull ends–we will then start to experience a pattern of 4-bar weekly ‘lower highs and lower lows‘ and the same strategy in play since 2009 may work in reverse for the bears.

We can see how the recent pullback bottomed at the very long-term support trendline and then rallied for five consecutive weeks before stalling at the current week’s ‘inside bar’… which is itself an inside bar to the previous week.

The initial ‘weekly bar buy‘ signal came on a cross above 2523 (see green arrow on chart above).  The current weekly trailing stop is located just under last week’s low at 2612.50.  Note also that line is equal to the current short-term range bottom from Stops and Targets.

That line at 2612.50 is what I am focusing on right now.  Lets move next to the daily bars/range chart to see why…

 

 

 

click image to enlarge

 

On the daily bar/range chart above you can see why the market stalled right at 2677.75 and we got the original range-top counter-trend sell alert for short and intermediate timeframes right there from Stops and Targets.

That was a perfect ‘back-kiss‘ of the broken short-term trendline support trendline (see red arrow on the chart above).  The pros often use a back-kiss of a broken trendline to be sure they have exhausted all stops on a counter-trend move.  In the current case–the stops that are under heavy pressure are those of bears who shorted at and below the trendline break on 14-Dec but then missed the huge Bottom Spotter turn at 2316.75.

Since the back-kiss at 2677.75,  the market has basically traded sideways in a very narrow range between 2612.50 and 2672.50.  That is equal to the short-term range at Stops and Targets.  See how that works?

This market is presently coiling for a momentum breakout from that very tight range–once the pros decide the time is right.

Remember what I often say here about these constricting periods of limited volatility… ‘first they bore you to tears, and then whammo!‘  The pros are distributing and/or accumulating for the next move and option players who guess right on direction can do very well once that breakout gets going.

The ‘whammo!‘ is likely incoming.  Only thing is–we don’t yet know which way the pros will take this on a breakout.  So, let’s look in both directions for some possible targets…

If they breakout to the downside of the short-term range (below 2612.50), the most likely major downside target would be the rising intermediate range envelope bottom, which is presently at 2397–but will start to rise rapidly soon.  ES 2438.50 will be the next stop higher and it will sit there for a few days before eventually leapfrogging way up to 2523.25 on or about 5-Feb and then rapidly advancing north after that date.  So, bottom line is to keep an eye on the bottom of the intermediate range envelope if this breaks bearish.

If the pros breakout to the north side of the short-term range top (above 2672.50) then we need to start watching the descending long-term range top (presently at 2822) as a next likely major upside target.  You can see on the chart above that the long-term range envelope has been descending from the Top Spotter at 2951 all the way to its present location at 2822.  The next notch down will be to 2818 and then it will stay there for some time–so for all intent and purpose, let’s just use 2818 as the next upside target if the pullback bottom is in.

So, head’s up right here inside the very small short-term trading range.  Once the pros decide to give the futures a kick in the pants–we’ll be off on the next leg toward the major range envelope targets that I have pointed out above.

…my .02

 

 

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