VST Trident Channel

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I have drawn in a new VST trident channel on the chart above using dark green trendlines.

The center tine of that trident acts as a dividing line that could give us clues here.  The rally from 1179 touched the center tine of that channel in the overnight session and has not been able to cross it since.

The center tine can act as a measuring tool to determine whether the recent VST rally is sustainable (if crossed)—or was perhaps merely a snapback rally to harvest bear stops for those who chased the initial break from 1208.

The light blue rectangle shows the new trading range bounded by 1216.75 to 1176.75, which was created by the double stop sweep above/below the previous range.  If the market is going to trend—it has to break out on one side or the other.

I think that the center tine of the trident could be in play today—so will be watching it for clues.  Generally speaking, that center tine defines a sort of tug-o-war line between bulls and bears inside the new trading range.

Bear stops are likely resting just above the descending red trendline which is the top rail of a large bearish trident channel.

VST bull stops are likely just below the bottom rail of the green VST trident, which can be used as an ascending profit stop guide for entries from 1179.  The channel should contain any wiggles—but if broken to the downside, then that could serve as a bearish confirmation.

All trends remain up > 1190.50 and the bottom of the green VST trident channel can be used to fine-tune that short-term primary trend line.

…my .02

Trading Range Revisited

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It looks like the game might have been to run the stops on both sides of the recent trading range between ES 1179.75 and 1210.50 (shown by yellow highlighted area on chart above) ahead of yesterday’s FOMC.

ES 1179 did turn out to be the VST bounce point after the stops were run just below that old trading range, and that was indeed a good spot to gamble on a rally back up into the range with initial protective stop at the lows.  There was a vicious little push down just before the FOMC announcement that tested that 1179 line and likely shook more than a few out who had the trade right, but those with a stop at the low were okay.

ES 1179 was the downside corollary of what 1210.50 was previously near the top and was used as a day trader pivot (bullish above/bearish below) by VST traders to exploit a stop run and reversal.  Pros likely sold into covering bears at the top and then covered into selling bulls and chasing bears at the bottom of that range.

If enough bears chased the initial break, then we could be seeing a snapback rally back up to take those trailing stops.

If the trend is going to eventually break bearish again after a probe into the range, then pros will again be selling to covering bears and we shouldn’t see too much of a push higher as demand is met with excessive supply.  If, on the other hand, this was just a typical pullback to ST primary trend support area in a continuing macro uptrend with a small overshoot, then demand will exceed supply as covering bears are joined by dip buyers looking for new highs.

S&T does a great job of nailing the spots where volatility is likely to occur—but it still takes some skill to position around those primary trend lines.  The trick (in my opinion) is to find the next lower timeframe support and resistance and to try to parlay that into a momentum move across a line.  Simply entering a trade at a primary trend line and then setting a tight stop is often a recipe for a quick loss as the pros battle it out and sweep the easy stops of those who trade with those tight stops in the midst of increased volatility.  It takes a bit of work and some strategy to wrest dollars away from true professionals—and the lazy don’t get rewarded in this game.

A perfect VST play (in my opinion) on the recent move was covering short partials at 1179, and then stopping the balance at 1189.  The pre-FOMC dip back through 1179 was the tell that the big boys were accumulating and that was the ideal VST buy spot ahead of primary trend line crossover to allow sufficient stop cushion to ride the wiggles across the line.

I read the current rally as a potential snapback where pros are likely cleaning up the bear stops of those who chased after the initial break.  The next likely upside target could be a back-kiss of the broken ST support trendline (dotted green on chart above) and then on to 1207.50 area if that trendline back-kiss fails to turn it back.

Sometimes bears get frustrated trying to enter short trades at the primary trend lines—and that makes perfect sense when you look at this from a macro trending perspective.  The market has been predominantly bullish for over a year, and those primary trend lines are designed to keep a guy out of trouble by generating stops to keep an ill-advised trade from being reversed and drug into counter-trend purgatory.  A good trader has got to learn to love small losses that could have turned into big losses without that protection.

Those 500+ spotter signals I mentioned recently remain a prime concern for continued viability of the macro uptrend—and after this push up, there could be a sharp reversal back down as a result…but for now, all trends remain up > 1189.

The initial pullback target for spotters is usually around the first primary trend support area and we got that within 24 hours of the top spotter signal.  Can’t let them drag you to the wrong side of the trend though—so 1189 serves as the dividing line for bias here—but using VST tactics for positioning.

I am watching for a potential back-kiss of the blue trendline first and then that dotted green trendline next—and if that comes, will be looking to see if there is a violent rejection at that line.  If not, then they likely will continue to push this back up to shake out as many bears as they can and that pullback to primary trend support could have been just another opportunity to buy the dip in a continuing rally.

The descending red trendline above is the bearish hard stop for those who positioned for a higher timeframe reversal near the top.

Bull stops are likely now just under the local pivot low (1176.75).

ES is back inside the old trading range for now, which could potentially expand to a new range between 1216.75 and 1176.75 without a breakout.  Price has to cross one of those lines in order to trend.

The pros effectively took out  large numbers of bulls and bears alike with the recent range stop sweep.  To me, that horde of spotters is a potential clue of what may come next—but as has been emphasized before–they are just counter-trend warning signals.  The true delineator of a macro trend reversal is a break and hold below the primary trend lines.  We have had the first probe and bounce off that line on ES—so now the trick is to cautiously ride the macro trend off that bounce to see where it goes, but with a wary eye for what those spotters might ultimately portend.

…my .02

ES Update

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The chart above shows the ‘after’ picture from this morning’s post.

A whopping 500+ spotter signals was the unmistakable clue yesterday, and today we got confirmation across all indexes and a very large number of individual equities.

This morning, I mentioned 1207.50 as the intraday bull/bear line and it turned out to be an ideal entry on the short side…right at the confirmation line for the top spotter.

I usually am not a fan of countertrend trading, but the unusual circumstances this morning were such that it made sense to take a shot at that line.  For those who did, there are now nearly 30 ES points in the bank, allowing sufficient cushion to easily ride out any potential volatility around the primary trend line and remain profitable.

The pros took out multiple levels of support today in what no doubt a ‘shock and awe’ move for many (but not for Stops and Targets members).  As I type, price is hovering around a pivot low at 1179.  That line now serves the opposite function that 1210.50 did yesterday as an intrabar VST bull/bear line–and is the line in play here as we await the start of the overnight session (for the US).

The next bunch of bull stops lower is at 1171 and if they really get crazy over the coming sessions, then the next hard support below could be down near 1141, which is where the last trend breakout occurred (see ‘Trending > 1141.00’ on multitrend indicator just below Bear 1 Rating on analysis results page for ES).

The short-term trend is now down below 1189, and so the macro bias is now short here until/unless that line is crossed to the upside.

My guess is that most bears missed this move, and if so, the pros have a nice head start advantage here that they are not likely going to relinquish if this is a true break—but we’ll see if this stays under the primary trend line, or not.

Ideal short entry (in my opinion) was at 1207.50 (or at 1210.50 yesterday for very aggressive CT traders) with a stop now set at 1189.  ES 1179 is the line in play, and if it were to fail, then 1171 would be next.  Trying to buy the dips immediately after a fast break like this is generally futile—but if it is going to rally, then I would expect it to do so after a stop sweep under a recent pivot, with 1179 being the first opportunity.

Today was a very good example of how one can use the shorter time frame to set up a higher time frame trade.  In this case, the VST tactics worked to ride the ST change across the primary trend line.

No guarantees (there never are) what may happen next, but the pros definitely took out the short-term bull’s trailing stops today.  If you were patiently long in that timeframe from near the February lows, this was a nice payday on the long side, and with some luck and good skill was also an excellent trading opportunity to position on the right side of the primary trend line with a cushion of profit, should a snapback rally bring it back into play.

For those who locked in long profits and scaled in short at the above lines—or at least north of the trend break, then this was an excellent day indeed–with profits long and short possibly equaling or exceeding a near perfect buy/hold from the Feb lows even while patiently waiting for trend change confirmation.

As always, the trick is to come away from these primary trend line interactions on the right side of the trend.  Spotters certainly hint at more down to come, but that short-term PTL at 1189 is the deciding line and is the typical first target of a pullback  in a powerful uptrend, even with an overshoot…and that has been achieved

ES 1179 should be the VST line currently in play…countertrend bullish above/short-term bearish below.

ST trend is down <1189.  Next PTL lower is IT at 1154.

There is much to be learned about multitrend positional trading by studying a day like this carefully.  A guy who did this right, took gains patiently locked in from the last short-term trend and is presently sitting in a short trade with a locked-in profit cushion above the primary trend line.  Now we just wait and see where this trend goes, and do whatever it takes to stay on the right side of the primary trend line.  There is absolutely no difference in tactically trading the short side from the long, except that the snapback reactions are generally more violent.  A push up and through 1189 is an automatic stop/reversal, taking profits from the short entry.  Otherwise, the trend is followed away from the line as long as it goes, taking partials as you go, and pushing trailing stops behind the trade—never knowing beforehand whether it will be a quick reversal stop-out, or the start of a huge multi-month run.

The VST positional tactics you saw today can work just as well when using the ST to position for the IT, or the IT to position for the LT.  Great trade entries are tough…requiring much patience and skill–and so when a good one is made, it is important not to give up one’s position in the trend by guessing at countertrend targets (in my opinion).

It is all about 1179 and 1189 here in the short-term, and we’ll see how it goes overnight.

…my .02

ES Spotter Setup


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Yesterday’s close triggered over 500 top spotter setup signals.  That is a huge number of spotters in one day, and although confirmation is required to validate the signals—the sheer volume seems to suggest something could be afoot underneath the surface.  The last time I remember seeing so many spotter signals at once was near the March 2009 lows.

For those of you with Signals Matrix access, I would highly suggest keeping a close eye on that over the coming days.

On the chart above, I have indicated several waypoints to watch…

1) The spotter signal hard stop is at 1216.75.  If price ticks back above that number, then this current setup is dead.

2) The confirmation number is 1207.50, that is the line below which the ES must close to validate the spotter setup signal.

3) A descending red trendline indicates the tentative bearish trident top rail.  That is a line that technically savvy countertrend traders will often use as a backstop for protective trailing stops.  If this eventually sells off and develops into a tradable channel, then that line should not be crossed on any snapback rally.

ES 1210.50 was the bull/bear line I mentioned yesterday as the spot where day traders would likely sell a pullback after a failed range breakout, and there could be some tight following stops lurking just above there.

Each of the ascending trendlines could produce buyers on a pullback—but the dark green trendline represents the bearish below/bullish above dividing line for the short-term trend.  It could unnerve some bulls if that line were to be broken and held.

There is, of course, the potential for mischief here, since the FOMC meeting announcement is a potentially explosive event.  From this morning’s vantage point, that meeting may be in the process of being front-run—but we’ll have to wait and see how things go as individual support and resistance areas are challenged.

For those who countertrend trade into setups, this may have been a good spot to take a shot ahead of a potential reversal.  The spotter was an early warning, the break of 1210.50 was the CT entry and the descending red trendline is the trailing stop for what I would consider to be a reasonably well thought out countertrend strategy here.

I am not an advocate of countertrend trading, in most cases—but the bears do appear to have a potential setup working here, and so whether one is pushing up trend following profit stops anticipating a payday–or looking to potentially try to establish a new position long or short…this is an area that bears watching closely.

The line in play today (in my opinion) is yesterday’s low of 1207.50.  Intraday action is bearish below/bullish above.

If the spotter confirms at the close, then the area around the short-term primary trend line becomes the first downside target.  If, on the other hand, they rally this intraday—then bear stops at the red lines may be the likely upside targets.

The descending red trident trendline above versus the ascending dark green trendline below is what my eyes are presently focused upon.

…my .02

ES
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Yesterday’s close triggered over 500 top spotter setup signals.  That is a huge number of spotters in one day, and although confirmation is required to validate the signals—the sheer volume seems to suggest something could be afoot underneath the surface.  The last time I remember seeing so many spotter signals at once was near the March 2009 lows.

For those of you with Signals Matrix access, I would highly suggest keeping a close eye on that over the coming days.

On the chart above, I have indicated several waypoints to watch…

1) The spotter signal hard stop is at 1216.75.  If price ticks back above that number, then this current setup is dead.

2) The confirmation number is 1207.50, that is the line below which the ES must close to validate the spotter setup signal.

3) A descending red trendline indicates the tentative bearish trident top rail.  That is a line that technically savvy countertrend traders will often use as a backstop for protective trailing stops.  If this eventually sells off and develops into a tradable channel, then that line should not be crossed on any snapback rally.

ES 1210.50 was the bull/bear line I mentioned yesterday as the spot where day traders would likely sell a pullback after a failed range breakout, and there could be some tight following stops lurking just above there.

Each of the ascending trendlines could produce buyers on a pullback—but the dark green trendline represents the bearish below/bullish above dividing line for the short-term trend.  It could unnerve some bulls if that line were to be broken and held.

There is, of course, the potential for mischief here, since the FOMC meeting announcement is a potentially explosive event.  From this morning’s vantage point, that meeting may be in the process of being front-run—but we’ll have to wait and see how things go as individual support and resistance areas are challenged.

For those who countertrend trade into setups, this may have been a good spot to take a shot ahead of a potential reversal.  The spotter was an early warning, the break of 1210.50 was the CT entry and the descending red trendline is the trailing stop for what I would consider to be a reasonably well thought out countertrend strategy here.

I am not an advocate of countertrend trading, in most cases—but the bears do appear to have a potential setup working here, and so whether one is pushing up trend following profit stops anticipating a payday–or looking to potentially try to establish a new position long or short…this is an area that bears watching closely.

The line in play today (in my opinion) is yesterday’s low of 1207.50.  Intraday action is bearish below/bullish above.

If the spotter confirms at the close, then the area around the short-term primary trend line becomes the first downside target.  If, on the other hand, they rally this intraday—then bear stops at the red lines may be the likely upside targets.

The descending red trident trendline above versus the ascending dark green trendline below is what my eyes are presently focused upon.

…my .02

New Spotter Signals

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There were a bunch of new spotter signals triggered at the close, including all the indexes (except for the Dow) and the ES and NQ Futures options.

Spotter setup signals still need to be confirmed before validation, of course–but 500+ spotters triggering  in a single day is highly unusual.