(click images to enlarge charts)
ES is now in the eleventh trading day spent meandering inside the 11/15 to 11/16 high/low range that was created by the initial breakdown of short-term primary trend support…
That 1205.75 to 1171 plunge created a doji candlestick on the weekly bar closed 11/19 (options expiration week). Dojis indicate indecision and a stalemate between bulls and bears–and so this sideways consolidation inside that bar shadow has likely been vacation time for the pros after booking huge gains from the July 4th bullish run that peaked on 11/09 bearish capitulation at 1224.75 (with a top spotter signal detected by Stops and Targets).
Typically, the first target of a confirmed spotter is the nearest primary trendline (in this case that was short-term). Once that initial trendline was broken and held, the next general target area became the next closest primary trend line, in this case intermediate primary trend support presently at 1163 area. That intermediate support lines up with where the pros would need to go to flush the short-term bulls out of positions.
After such a long time spent in a sideways consolidation, many trend following bulls and bears have likely tightened their trailing stops. Of course the favorite place for most traders to place stops is below a key structural pivot for bulls—in this case 1171 formed at the 11/16 low, with a second layer of stops at 1167…or above a key pivot for bears, in this case 1206.
If the range breaks to the downside under 1171, then we could see a run to intermediate support as the next downside target. At that area, we could see either buying as intermediate support comes in—or perhaps a slash directly through intermediate support on a fast move, which would ultimately target the long term primary trend line presently at 1110 area.
The game for the pros is and always has been to maneuver traders to the other side of their trades at the exhaustion of a move. That was accomplished on 11/09 as the squeeze above 1207.75 took out most of the countertrend bears.
In the case of a bearish move, the pros need to ultimately squeeze as many bulls as possible to force them to sell at bargain prices–just as the pros are ready to buy to cover. Many bulls are looking at 1171 as a line where they would start coughing up their positions. That could make the area under there particularly attractive as a source of guaranteed sellers—and a place, of course, where bargains can be found for shrewd buyers.
It takes very little to move the market inside the trading range as the pros continue to chop up day traders placing sloppy bets inside the ‘killing zone’. An eventual break below 1171 (or above 1205.75) should bring volume, as the less nimble traders who have become conditioned to placing range-trading bets at the trading range extremes would be trapped on the wrong side of a trending move and would join panicked bulls selling (under 1171) or panicked bears buying (above 1205.75).
From a trending perspective—nothing noteworthy occurs until a break of the present 1171 to 1206 trading range occurs.