ES 2010 Year in Review

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In a typical year, there are about 8-12 macro trending moves on the ES, and 2010 was indeed a characteristic year in that respect with 10 swing legs…shown on the chart above as a series of red and green arrows at the pivot highs and lows at the start of each swing.

Each of those pivot high/low arrows represent a theoretical ‘perfect trade’ entry.  Of course, in a real-world scenario, it is almost impossible to catch those extremes.  Instead, the goal for a disciplined swing trader is to wait for a turn confirmation, and then to try to catch as much of a trending move as is possible.

Near each swing pivot high or low on the chart above, a small red or green horizontal line is located with a sequential trade number from 1-10 in red (bearish) or green (bullish) and ideal swing trade point yield for each leg in blue.  Each of those numbered lines corresponds to a ‘Big Picture’ blog post cross-referenced and linked below.  Click on any numbered link to view the post that corresponds with that numbered turn on the chart above.

1) http://stopsandtargets.com/members/futures/blog/?p=176
2) http://stopsandtargets.com/members/futures/blog/?p=48
3) http://stopsandtargets.com/members/futures/blog/?p=495
4) http://stopsandtargets.com/members/futures/blog/?p=692
5) http://stopsandtargets.com/members/futures/blog/?p=730
6) http://stopsandtargets.com/members/futures/blog/?p=795
7) http://stopsandtargets.com/members/futures/blog/?p=916
8 ) http://stopsandtargets.com/members/futures/blog/?p=1006
9) http://stopsandtargets.com/members/futures/blog/?p=1310
10) http://stopsandtargets.com/members/futures/blog/?p=1400

(All numbers from expired contracts have been adjusted to the March 2011 contract on the chart above).

Note on the chart above that a good swing entry is almost never touched on a retrace after the breakout, and the breakout move is usually fast once key support/resistance has been broken..

Statistically, the 2010 macro trending moves break down as follows…

Total swing high/low extremes = 1312 points
Total swing high/low bearish = 558 points
Total swing high/low bullish = 686 points

Total ideal trade entries = 849 points (65% efficiency)
Total ideal bearish swings = 353 points (63% efficiency)
Total ideal bullish swings = 496 points (72% efficiency)

2010 was a great year for trading on both sides!

I wish everyone a happy and prosperous New Year, and thanks for reading…

‘Swinger’

12-29-2010

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One gets the distinct impression that the junior varsity has been holding down the fort whilst the big boys are away vacationing…

ES continues to drift sideways/up as everyone awaits the next move.

Next VST target higher is Stops and Targets’ short-term simple resistance at 1263.75.  A break of the dark gray VST support trendline (presently at 1252) represents the first bearish target…and of course, price is hovering at about the midpoint of that approximate 10 point range.

The purple trend channel continues to define the trajectory of the bullish move since the December 1st reversal and breakout.

…my .02

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As we near the end of the 2010 trading year (and it has been a very good one), I thought it might be interesting to post several identically-scaled weekly charts to better illustrate the ‘Big Picture’…especially in context of the probable effects of the American Recovery and Reinvestment Act of 2009.  The February 2009 start date of that massive stimulus injection is shown as a vertical dashed blue line on all charts.  The trendlines represent the long-term trend configurations for each symbol.

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The order of the weekly charts are as follows…

ES (S&P 500 Futures)
NQ (NASDAQ 100 Futures)
YM (Dow Futures)
DXY (Dollar Index)
CIY (Commodity Index)
YG (Gold Futures)
QM (Oil Futures)
VXO (Volatility Index-original)

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ES Update

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As I type, ES has broken the first VST trendline, back-tested that line, and has bounced off first VST support at 1245…

The first sign of continuing bearishness would be a break below that support at 1245.  The next signpost would be a push below 1234, which is the most recent highest low of a bullish bar progression on the weekly chart.

The initial daily bar downside target is at Stops and Targets’ short-term primary trend support at 1227.25, and that would be the initial target of a confirmed top spotter (which would only confirm on a close below 1249.75), should selling occur from the present level.  That level also roughly corresponds with the bottom of the rising purple trend channel that has defined ES recently.

To the upside, there is an open gap at 1252.75 and the next target would be stops resting above the recent high at 1255.75, followed by the dashed red trend channel top presently near 1265 and finally by the top of the purple trend channel.

The market is extended here from major trendline support levels (the closest is at 1170), but bulls remain in control above 1227.25 in the short-term, and above 1245 in the VST and those are the major support levels presently in play.

…my .02

Spotter Potential

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If the market closes weakly today, the potential exists to establish unanimous top spotter detection signals across the major cash/futures indexes.

Stops and Targets displays intraday spotter detection/invalidation, so the cash indexes and Futures would be the place to watch for precise intraday levels…

As I type, SPX would need to close below 1243, the NASDAQ Composite under 2642, and the Dow must remain under 11,519 (spotter detected on Friday).

ES would need to close below 1238 and NQ must stay below 2226 (detected Friday).

From a spotter perspective, the close is what matters, when the daily bar enters history and cannot change.  Intraday, anything can still happen here.  The advance/decline line is roughly equal as I type, and this day could just as easily be reversed to new highs from present levels—especially with an appearance of buyers in the futures to drive cash market arbitrage.

These are ideal conditions where spotters are formed, and so I just wanted to give an early ‘head’s up’ that the possibility exists—especially in light of the fairly large numbers of recent internal spotters.

There is VST trendline support near 1232 that could serve as a intraday confirmation sell, if broken and held–and that would be the first place where sellers would likely begin to appear, if a downside move is going to happen from this setup.

…my .02

Freaky Friday

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Today is Quadruple Witching (aka ‘Freaky Friday’), when contracts for stock index futures, stock index options, stock options and single stock futures (SSF) all expire.

ES has been locked into a small range between 1230 and 1240 since contract rollover day more than a week ago.  Clearly, the pros have this right where they want it for this expiration.

We’ll have to see how the day goes after the cash market open and AM settlement, but the first obvious intraday constraints are the two range numbers mentioned above at 1230 to the downside and 1240 to the upside.

The recent local high is at 1242.25 and there should be bear stops sitting there from those who have been taking shots on the short side during the past week’s snooze-fest.  Just above that is a band of minor resistance between 1245-1247, another at 1255 and then the next S&T short-term target of 1263.75

Under 1230 is an open gap at 1227 and then the stop sweep/reversal line at 1219.75 (lining up approximately with S&T’s first countertrend sell line at 1217).

ES 1219.75 (1224.75 on expiring December contract) represents the line above which bears who missed the exit on December 1st have been squeezed since the early December breakout above the November pivot high at that number.  Stop sweep/reversal plays often take weeks to set up to allow sufficient time for those who are being squeezed to finally capitulate.  It remains to be seen if the recent activity above that line is part of a stop sweep/reversal setup, but it has been potentially behaving that way and fairly large numbers of recent internal spotter signals suggest caution is warranted to the upside.

Ideally, a tradable top—when it comes–will consist of a unanimous (or nearly so) alignment of top spotters across the broad market indexes with large numbers of individual issues internally.  Although the Dow and NASDAQ have initial (unconfirmed) spotters, the SPX and ES do not.  A pop above recent highs and reversal to a weak close might do it, but I mention that only as an intellectual exercise.  The odds remain with the bulls above 1217, and speculative top-picking without confirmation is an expensive habit.

The trend is your friend until it isn’t…and the macro trend has been up since December 1st at 1185, netting +52 points since that initial S&T short-term buy signal, where the bulls seized control.  The purple trident channel has been defining the trajectory since the turn with the centerline serving as current support.

All Stops and Targets trends are up > 1214.25

…my .02