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Stops and Targets had last week’s trading range rally sniffed out from the get go…

NQ has now rallied back to ST resistance at the top of its trading range at 2368, and ES is just short of the top of its trading range at 1338.50, with a pre-market high of 1337.75.

A little post-mortem is in order here…

The ES momentum changed from bearish to bullish at the bottom spotter signal on June 16th. I noted a change in character from VST lower highs/lower lows to higher lows/higher highs shortly thereafter.

The VST double bottom occurred on Stops and Targets’ range bottom line at 1260, and we have just seen a run back to the top of that range near 1338.50.

I posted the dashed purple ‘last chance’ stop/reversal line for bears near 1280, and that was exceeded on 6/28 just before the final run up and through the long-developing stop sweep/reversal play at 1284.75, where the IT bottoming process was working from.

So, now that we have run back to the top of the range, the obvious question is ‘what’s next?’…

Stops and Targets is presently in Multitrend Rating ‘Bull 9’, and the character of that particular configuration is typically to morph quickly into a ‘Bull 10′, or fully bullish market across the major timeframes.

We could see a pullback from resistance in this area, but until/unless price crosses the rising primary trend lines–the macro paradigm has changed.

First things first, though, and we have a trading range environment again that must be resolved. Price is at the top of that range–but the macro trend has switched, so we see a little uncertainty from traders, and that is normal.

It is this type of trading environment where stubborn bears can sometimes take a terrible beating. Everything was going the bears’ way until that bottom spotter showed up to warn that something happened to momentum. The long sideways/down action as the IT trend intercepted the LT trend had lulled many bears into complacency, and when the fast reversal move happened–many bears missed the exit and instead of reversing to the easy money on the long side, kept trying to short each tiny dip, only to be flipped to unwilling buyers as the pros unloaded that which they accumulated lower.

The bears came close to breaking it wide open near LT support, and being short was the correct trade right up to the point where resistance started breaking and Stops and Targets starting showing buy signals and a major macro trend change. It is probably a good idea to reflect back on the setup going into last week’s amazing rally to remember how the news and noise was uniformly ugly (remember Greece?). The news and noise is NEVER right at tradable turns, and the more cynical among us would suggest that is done by design.

Like I was saying last week, Stops and Targets never misses these turns, and though we humans may have our emotional doubts, the program is doing exactly what it was designed to do, and that is to make suggestions to help protect our assets, while figuring the best trading setups in real-time.

We are at the range top, and so now that partial profits are locked in from that amazing rally for those who have been following the S&T signals, we’ll see what comes next– but barring something extraordinary, the odds are that the pullbacks above this spotter signal will now be bought, and that eventually the ST primary trendline will re-exert to provide support.

The trend lines are setting up to mirror Stops and Targets analysis, with ST trendline support now defining the boundary of a bull/bear market. (note: S&T is a faster reacting system than traditional trend lines by themselves, but it is always a good idea to cross-reference for verification)

All S&T primary trends are up > ES 1299

…my .02