1205.75 to 1171

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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.

…my .02

ES Update


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The last push up to 1200.50 was a direct hit on resistance at the light gray trendline.  That line, together with the dark green trendline support, forms a triangle, which indicates a decrease in volatility as price and time converge toward an eventual resolution of the present 1171 to 1205.75 trading range.

The weekly bar is in play today, and bears would need to take out 1171 to ignite selling and to seize control from the bulls–who otherwise will have won the week with a higher high/higher low.

…my .02

ES Update

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The trading range I pointed out yesterday between 1205.75 and 1171 remains the immediate focus. (See shaded yellow rectangle on the chart above)

Bears got the ST trend channel break yesterday, but weren’t able to do much with it on the first push down.

Stops and Targets found a number it liked at 1174.75 to recommend covering short partials, which lined up perfectly with a test of trendline support where the bears stalled.  There was a subsequent overnight pullback to retest that rising trendline support at 1175.50.

The short-term primary trend line at 1190.25 is in the approximate center of the trading range and therefore at the epicenter of swings across this roughly 35 point wide volatility band.  Range trading specialists have been doing well here over the past few trading days if they have been using the top and bottom of that range for trade entries/targets.

The bull stops remain untouched, so far, under 1171 and that is where the bears would need to push through to the downside to ignite any significant selling and to seize control of the macro trend.  So long as ES remains above that key number, the weekly bar shows a bullish higher high/higher low.  If those stops were to be taken out and a downside breakout sustained, then things could start getting interesting.

Bulls, on the other hand, need to push back above the primary trend line and then the two range bound trendline resistance levels to get to a potential upside trending breakout > 1206.

The wiggles inside the 1171 – 1206 range are essentially meaningless for trend followers as the range traders do their thing and the market consolidates for the next trending move.

Tomorrow (Thursday) is Thanksgiving here in the US.  CME Globex will halt trading at 10:30 CT and resume at 17:00 CT, in observance.

Happy Thanksgiving

ES Trading Range

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The chart above show the present trading range between 1171 and 1205.75, highlighted by a shaded yellow rectangle.  That range was created by the previous week’s high and low.

I have also included a weekly bar chart to help visualize the big picture setup here…

The recent 1224.50 high took out the bear stops above the April pivot high and also touched the .618 Fibonacci retracement level from the October 2007 to March 2009 bear market.  There was a top spotter signal generated at that high, which has been confirmed.

There were two weekly bearish candlesticks with a lower high/lower low sequence culminating at the 1171 low where a sharp VST bounce occurred.

The gap opening yesterday just slightly exceeded last week’s high (by .25), which technically breaks the lower high sequence.  As I type, we have a higher low/higher high configuration on the present holiday week bar within the trading range depicted.

For the bears to seize back the trending momentum, they need to break out of the bottom of that trading range to negate the potential pivot low building at 1171.  If that were to happen, bulls would definitely be forced to start selling.

For bulls to reassert the uptrend, they need a sustained breakout above the recent high at 1206.

The respective bull and bear stops are undoubtedly congregated at those two locations.  In the meantime, we have a great deal of confusion building as the volatility continues around the short-term primary trend line area awaiting a resolution of the present range.

I have drawn in two additional trendlines that may help to provide an early clue within the range…

The green trendline is the bottom of the present short-term trend channel.  If that fails to the downside, then the push could be on to get those bull stops under 1171.  On the other hand, if that bottom rail holds, then we could potentially get a bounce back up to challenge the descending red trendline drawn off the spotter high.

Sometimes it is best to simplify one’s outlook during periods of range-bound volatility and nothing is decided from a trending perspective until/unless one side or the other of the present trading range is broken.

Within this range can be a sort of ‘killing zone’ for very short-term traders trying to enter trades with tight stops at the middle—rather than at the outside extremes of the range.

It could be that the play that is being run here is simply a trip from one side to the other to raid the stops.  If so, then the ideal VST entry was at the top of the range at 1205.75, which is near the Stops and Targets countertrend entries at 1203.25.  If they take out this green trend channel support, then we might see a run down to get those stops under 1171—otherwise, if they defend that green trendline, then the plan might be to paint a higher low/higher high on the weekly chart.

…my .02

ES 1187.50

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ES futures opened with a gap last night that pushed .25 above last week’s high and then sold off.  That sets a marginal new high on the weekly bar and it could be the top of a VST (very short term) trading range based upon that bar.  The low of that potential range is equal to last week’s low at 1171.

The intermediate-term strategic outlook that I laid out in my last post remains plausible—but I continue to question the tactical aspect, so long as the VST uptrend from 1171 remains intact…

The key line that bears would need to take out to the downside to reverse the present VST uptrend is located at 1187.50.  That line is from the back-kiss touch of the broken purple trendline resistance pointed out in the last post as the next likely bounce point.  That bounce set a higher low and the gap opening overnight set a higher high in the VST trend.

I have had an uneasy feeling about mixing up timeframe priorities and essentially placing the cart before the horse.  As usual, Stops and Targets gets it right and has been pointing out the short-term timeframe as the timeframe currently in play—not the intermediate.

The purple trendline breakout at 1192 is where bears in all timeframes lost the momentum, and the back-kiss to that trendline breakout was the retest that the VST bulls used to validate that momentum change.  For the VST bulls to lose that breakout momentum, that back-test line at 1187.50 would need to be crossed and held to the downside.

That line at 1187.50 can serve as a VST bull/bear line for trades from this area and it lines up very well with the present Stops and Targets ST primary trend line at 1190.75

All trends remain up > 1190.75