(click image to enlarge chart)
For the first time in months, we have spotter signals that span multiple indexes.
At the close today (Thursday) top spotter setup signals are present on:
S&P 500 Cash Index
NASDAQ Composite Index
S&P 500 Futures Options (ES)
NASDAQ Futures Options. (NQ)
The door is now open for the bears to potentially get something going and an intraday reversal off new highs with a fast move down and a late day triggering of spotter signals is exactly what I was talking about in recent posts.
Things can move quickly when a valid spotter is in place, and if the selling accelerates then the next likely target lower is the bull stops under the VST trend channel.
I have drawn in the first possible trident channel top rail (with a spotter signal in place), which could act as an upside boundary on any snapbacks within a new developing downtrend. If that red line is taken out to the upside, then the probability increases for the spotter signal to be invalidated.
It does not take long to go from the hunter to the hunted, and so this is a place to start considering the possibility that a tradable top may (emphasis on ‘may’) be at hand. It is time to snug up stops on existing long positions and to mentally prepare for a potential switch of bias if selling kicks in.
Basic rules for a top spotter are that any move back up above the spotter high invalidates the signal–and confirmation comes on a subsequent close below the signal bar low.
To learn more about spotters be sure to read the following links from S&T User Guide:
We’ll have to wait and see if this first little poke down at the close is the real deal, or not. If a top is built here, there are likely innumerable candidates for short-side trading for those so inclined, and a look at the Spotter Tab in the Signals Matrix is a good idea for those with full access subscriptions.
Not all spotter signals pan out, of course—and the usual first target for one that does is short-term primary trend support, presently at 1142 area, which lines up with the bull stops under the lower VST channel that I have been mentioning recently.
The bulls haven’t been tested in a while, and so perhaps a stop raid is in order now that bears have been run out at the highs–but we’ll just have to see what develops overnight and tomorrow.