Recently, I have been mentioning the VST (very short-term) trading range between 1296 and 1267…
The pros have managed to sweep both ends of the close-in stops (bears above 1296 and bulls below 1267) and now we are seeing a bounce back to within the old trading range. That is what I meant by a ‘target rich environment’ that was set up by the 1/18 and 1/21 structural high and low at 1296.25 and 1267.50 respectively. We hadn’t seen a structural pivot form since mid-November, and so that was the big clue when those two pivots finally formed at a stall of the momentum and a test of the resistance band I have been targeting for quite some time in my posts.
The initial goal was to flush the bears at the highs, which they did by riding a series of back-kiss sells at the old purple trend channel bottom rail. The net effect there was to wear out the bears by constantly running tight stops set at previous highs—then when the time was right, they yanked the bids and pushed it down quickly to target the trailing bull stops under that structural pivot low at 1267.50.
That was clearly the pre-planned and intended move and what I would refer to as a ‘watering hole ambush’ …and most very short-term traders trying to catch knives probably missed both ends (as usual), and by design.
(click images to enlarge charts)
I made two screen captures of Stops and Target’s S&P 500 Futures tab to show how it nailed both ends of that move. The first shows the selling that came at a touch of the confirmed resistance target of 1299.25. The actual high of the day was 1299.50! That target has been hanging out there for weeks, and when you see a solid red target line on those charts (as opposed to simple resistance which is represented by a dashed red line)—that is something, of which, to pay careful attention.
The second screen capture shows the touch of the confirmed support line at 1263.75, which is also a solid line (as opposed to simple support which would be shown as a dashed green line). Again, when you see that on a S&T chart—expect something to happen there.
S&T users had an opportunity to sell .25 from the high of the move and to cover 1.5 points from the low of the move, for an amazing 35.5 points of a 37.25 point move!
The techniques I use to derive VST targets are a little different from those used by S&T, but I always defer to that amazing system for obvious reasons and this would be a good example.
(click image to enlarge chart)
The recent stop sweep move is going to undoubtedly trigger significant bearishness out there. It may turn out to be warranted—but only IF the bears can take out and hold the territory below 1267 after a snapback rally. We’ll have to see how high and far the bounce goes now that the pros have gotten what they were looking for on the post FOMC setup (the stops on both side of the range) and have tagged the key confirmed support level at 1263.75.
There is an (as yet unconfirmed) spotter signal in place from the high at 1299.50, and so I have drawn in a tentative bearish channel in magenta that should limit any upside to all subsequent snapback rallies if a trend change is forthcoming. The bears would need to close the daily bar under 1270.50 to confirm the spotter (and take out and hold the area under 1267.50).
The first VST resistance is at 1278.50. The next resistance above, should 1278.50 fail to cap the snapback from short-covering above 1267 is the short-term trendline break at 1283.75 and the bottom of the blue FOMC trident channel break at 1286.
ES 1267.50 can serve as an intraday bull/bear line for ES. Price action is VST bullish above and bearish below.
Stops and Targets’ short-term primary trend line is now in play at 1274.50. That is often an area of volatility after an extended trend–but the intraday bull/bear line at 1267 should provide some wiggle room around that line.
…It’s all about 1267 here, in my opinion…that’s the real line in play and the center of the battle for control of the trend after the double stop sweep.