ES Update 9-30-10

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They got the counter-trend top-pickers again, so the tentative trident rail–and the (unconfirmed) spotter are both invalidated.

The move was a breakout through VLT (very long term) trendline resistance and likely caught those trying to establish a counter-trend short from that line.  The trendline breakout line is 1144.25 and that should be worth watching on the first pullback.

Next upside target becomes S&T short-term target at 1160.75, which lines up nicely with long-term trendline resistance.  A heavy resistance band is just above there starting at 1164 area.

The ideal VST buy pointed out at 1035 is now up > 110 points!  VST support below is at the rising gray trendline drawn yesterday, currently near 1135 area.  That would be the first VST technical break if this were to turn into a stop sweep/reversal move.  ST support is at 1120.75.

Getting closer to the top of the contracting triangle shown on the daily chart…

All trends remain up > 1117.

…my .02

ES Update 9-29-10

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The tentative countertrend bear stop line I drew in yesterday is working, so far.  So long as ES continues to work lower under that line, the most aggressive bears have some hope.

ES would need to trade below the S&T (Stops and Targets) short-term support line at 1120.75 to trigger the first short-term countertrend sell signal and the bulls would likely only start selling under 1117 as trailing stops begin to activate.

To the upside, the next S&T target lines up with the long-term resistance trendline at 1160 area.  Above that is a band of very heavy resistance (shown by shaded red rectangle) that might eventually need to be gapped through to circumvent, if the ultimate plan is to break out higher.

As I mentioned previously, the last significant VST (very short term) resistance was at 1138.50 — so this recent action has the feel of a quarter-end squeeze as price has levitated in a zone with few upside targets between here and 1160 area—but it could also be an effort to work towards challenging the upside resistance band.

The ideal VST trade (in my opinion) remains long from 1035 with trailing stops set at 1120.25 short-term primary trend support.  There is a (unconfirmed) spotter signal in place at 1149.75 and so caution remains in effect for existing long trades as the pros continue to wear out impatient countertrend traders above the squeeze line at the 1120 area.

The ferocious 9/24 squeeze took out a full slate of confirmed index top spotters before they reached their first downside objectives.  That is a fairly-rare occurrence, in my experience, and so I watch now with great interest to see what comes next.  It was all set up to fall there and came within .25 of a technical sell trigger at 1117.

As quarter end approaches, the two closest trendlines on the chart above are the immediate focus.  A breakout above the tentative trident channel top rail (red descending trendline) could lead to a shot at the LT resistance trendline and S&T upside target at 1160.  A breakout and hold below the (light gray) rising VST support trendline would be the first possible bearish confirmation for the as-yet unconfirmed spotter.

All major trends remain up > 1114.50

…my .02

ES Update

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1) Red trident channel top rail just above the VLT trendline is the ‘oops’ line for countertrend bears.  If price climbs back above there, then the VST countertrend bear trade is likely wrong–otherwise that line serves as initial bear trailing stop line for countertrend entries for the most aggressive countertrend  traders.

2) Early bears who have been squeezed since 9/23 remain trapped above 1120 area.

3) ES 1117 is where the bulls will begin selling, if taken out to the downside.  That would be the first technical break for VST bears.

4) ES 1111 is Stops and Targets’ short term primary trend line and first target of a pullback here, should the latest top spotter confirm.

Ideal VST trade remains long from 1035…but with a wary eye on the progress of the countertrend attack using the lines mentioned above.  ES 1117 – 1120 area remains the key.

…patience

…my .02

ES

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Friday’s rally off the ST/IT trendline breakout back-kiss and the Stops and Targets (S&T) short-term buy signal at 1120.75 invalidated the recent ES (S&P 500 futures) top spotter setup by exceeding the signal bar high > 1144.

That sort of crushing blow to countertrend traders is why I personally don’t like to try to anticipate trend changes and prefer instead to wait for the clear technical break.  ES came close to signaling that break at 1117, but support held and buyers bought the bounce off the trendline back-kiss.

The next targets higher are the very-long-term (VLT) resistance trendline at about 1145 and then long-term (LT) trendline resistance near the ST S&T target at 1160 area.

ES is at VLT trendline resistance, as I type.  The next significant VST resistance above the LT trendline and S&T short-term target at 1160 area is at 1163-1169.

ES 1117 remains the line that bears would need to take out to the downside to start any meaningful selling from bulls, but a break below 1138.50 could start some profit taking from those eager to lock in gains from the recent run-up.

The intraday chart above shows the significant events from the current leg (see previous posts for details on each), starting with the VST buy setup at 1035.75 and then the 9/1 bullish breakout at 1058.  ES is getting close to the top of that contracting triangle formed by rising ST trendline support and falling LT trendline resistance—and that formation is what is driving the big picture, in my opinion.

Conditions could be right today to form new spotter signals, but only if we get a weak close.  The pros are busy wearing traders out in this squeeze zone above the stop sweep/reversal line, so there should be plenty of bearish skepticism built up when the time comes for the eventual reversal.

The trend is your friend until it isn’t…and the trends remain up in all timeframes > 1109.25.

…my .02

ES Update

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The daily bar chart shows the contracting range formed by converging long-term trendlines.  The fulcrum for the trendlines is the April to July bearish down leg–and price continues to coil tighter and tighter within the shadow of that trading range.  As I mentioned in a previous post, the April to July decline leg is just inside of the inner Fibonacci retracements (between 38.2% to 61.8%) from the larger 10/07 top to the 3/09 bottom.

Eventually, this market is going to break out of the contracting triangle on one side or the other, and when it does–the move could be spectacular.

Yesterday’s VST (very short term) support target at 1117 held up on the low test (1117.25 was the low yesterday) and we are now seeing buying on a back-kiss retest of the ST/IT trendline breakout that occurred on 9/16.  If that broken trendline were extended, it would line up favorably with Stops and Target’s short-term support number at 1120.75…and so that line continues to work as the short-term and intermediate term dividing line between bulls and bears.

The confirmed top spotter signal remains intact here–and would only be invalidated by a move above the signal bar high at 1144.

This is what I was talking about recently when I wrote that stop sweep reversal setups can take some time to play out.  To my eye, the bears still have a chance here, so long as the spotter remains intact on this bounce from the trendline back-kiss, but it takes patience to wait for the eventual trader exhaustion and squeeze to play out…if it is going to happen.

Closest bull stops remain under 1117 and that is where this would probably need to go to get any significant selling pressure to kick in.  Next VST target higher is at 1138.50 and then the descending VLT (very long term) trendline presently at 1146.

All trends remain up >1105.75 but there is a confirmed spotter signal in place below 1144 and that means exercising caution on the upside and developing a mental preparedness to switch sides, should a reversal eventually occur.

…my .02