(click images to enlarge charts)
Stops and Targets is now indicating a short-term trading range for ES between 1342.50 and 1271.50. The VST (very short term) range is 1292.50 to 1343.
After the recent unrelenting run-up, ES is working on establishing a potential structural pivot from the initial pullback starting at 1343. The best candidate for that at present is the recent pullback low at 1292.50. It may take several more days inside this range (or above) for that structural pivot to form. It must hold on any pullback (which would otherwise reset the cycle time clock if that low at 1292.50 is exceeded).
This is typical action after an initial pullback and is necessary to build the trending structure for the next move. If, for example, the market is nearing a top—it is important to establish the three points necessary to build a bearish trident. The initial handle point is in place at 1343, and the potential structural low is in place at 1292.50. What would need to be determined next is the second pivot high to determine the slope of the decline.
The reason structural pivots are called that is because they enable two scenarios to build—the first of which I described in the previous paragraph. The second bullish scenario is shown by the tentative trident channel I have drawn in (dashed teal lines on the chart above). Thus far, that scenario is the most plausible because the market is moving higher from that structural low and not enough time has elapsed to allow the formation of the second pivot. Hence, the resulting trading range with an upward bias.
The early action has pushed through old VST resistance at 1322.25, and that line will probably serve as an intraday bull/bear line for day traders. Late to the party bears who missed the entry at the shaded countertrend sell zone and then missed the cover target at the bottom of the green trident channel and the subsequent protective stop trigger at the break of the dotted red trendline are presently being squeezed here above that line.
An anecdotal observation…
The last high at 1343 triggered no top spotter signals on the indexes, and though that is not a requisite for a swing pullback—it is always nice to see those in place before getting bearish. I can’t help but notice that the usual permabear suspects I track are frothing at the mouth bearish (and some have been for months). When a significant top comes, typically the permabears are in deep hibernation and that’s not what we have been seeing of late as the top calling has been extraordinary and the usual posts about ‘poor fundamentals’ and ‘crash coming’, etc., are everywhere to be seen. Those guys probably need to get to the last stage of ‘acceptance’ (in the five stages of capitulation) before the turn comes, and I am not seeing that yet. When I posted the ‘giraffe in quicksand’ video link recently, I was thinking ‘denial’ was the likely state and following that comes ‘anger’.
If this current push continues higher to take out the recent high—we could start to see some angry bears emerge…and then the time will come again to start watching for top spotters to form. Of course, this type of general sentiment observation is just anecdotal and not something that one builds a trading strategy upon, but it can be interesting nonetheless.
Stops and Targets is handling the emotion-less strategy calculations, and for now, all trends remain up > 1312.50.