ES Update

.

The setup remains the same but we now have the first new structural pivot since July 25th, with a ST high locked in at 1424.75.  The stall in momentum here switches ES from trending in the short-term > 1376 to now being in a trading range between 1321.25 and 1424.75 (and is reflected in the summary tab on S&T).

Again, all of this is falling in place according to the VLT trend line target touch.

.

.

.

The daily bar chart above shows the new ST and VST ranges.  As I pointed out in my last post–the small range in play here is 1395.25 to 1424.75.  A break below the bottom of that range and bears win, whereas a breakout through the top would negate the spotter and would be a huge win for bulls by virtue of reversing the macro VLT trend.

The key VST bull/bear line remains 1395.25, that is what bears need to break to set lower targets and what bulls need to hold to generate an eventual higher low.

.

.

.

I have posted an updated hourly bar chart above showing the key features in play… first clue comes on a breakout from the triangle formed by VST support trend line (dark gray) and the counter-trend bearish trailing stop trend line (magenta).

.

.

.

Stops and Targets is keying on 1405.25 for the trending trade–but under that line a counter-trend trade would be signaled.  That all lines up with my VST analysis and the hourly chart above.

…my .02

.

.

ES Update

.

.

Focusing on the ‘big picture’, the monthly bar chart above shows the touch of VLT (very long term) resistance.  That is the last resistance from the macro bear market and we have, as expected, quite the battle going on here as traders position for the next trending move away from this line.  As those of you who have been reading my commentary for a while may know–that VLT trend line has been my macro target for quite some time.

.

.

.

Zooming in to daily bars to look at trading ranges, we see a poke above 1413.25 and then the touch of the line with a small overshoot to 1424.75.  That is defining the shaded red area in the following chart…

.

.

On the hourly bar chart above I have added a trailing stop guide (magenta descending trend line) that represents a positive profit stop guide for bears moving in the direction of the counter-trend trade from the spotter signal at 1424.74.

That top spotter was confirmed with a close under 1408 and so we have all the ingredients in place for a reversal here.

I mentioned that we needed to see a minimal pullback to establish a structural low candidate and we got that at 1395.25.  Now, that line is what is in play here in the VST as bulls are gaming a breakout above macro trend resistance–and bears are playing the setup I outlined above.  If ES breaks below 1395.25, we should see additional selling as the cycle clock will have to be reset as we would start looking for the next structural low candidate.

The small range that is building here is 1395.25 to 1424.75 and the present price is midpoint between the breakout targets on either side:  if we see a run belown 1395.25, the next target lower is at 1376.  If the spotter setup is broken and we get a breakout above 1424.75, the next target higher is 1438.50

The small range midpoint is (1424.75 + 1395.25)/2 = 1410

1438.50 – 1410 = 28.50

1410 – 1376 = 34

…so pretty close on the payout, with a slight edge to the downside.

For this setup to work for the bears –it will need to ‘feel’ bullish to most.  All bearish bets are completely off if ES trades above 1424.75–and the odds increase dramatically for that happening if the trailing stop trend line (presently at 1421) is broken.

It’s all about the resolution of VLT trend line resistance.

…my .02

.

.

ES Update

.

.

I have included an updated VST chart above to show the trailing stop line from the tentative 1424.75 spotter high.  If a decline gets going, that trailing stop line should not be crossed.

First sellers would come in < 1405 and the minimum structural pullback target is now at 1401.75

There are now 15 days worth of bull stop congregated at the 1387.50 area.

Setup is otherwise the same as described yesterday.

.

.

.

Checking in with Stops and Targets…

The initial counter-trend sell setup at 1413.12 found its target yesterday at 1405.25 for eight points.  Echoing my VST analysis, first sellers would come in under that line where a second counter-trend trade would trigger (possibly targeting 1376), but trend remains up in all timeframes (above 1327.75)–and so bias remains with the long side on the dips into ideal buy zones.

…my .02

.

.

ES Update

.

.

Okay, we now have a touch of the VLT trend line resistance followed by a pullback that has generated spotter signals across all indexes and index futures.

Pretty good shooting, eh?  🙂

Now the next step is watching for either cascading confirmations–or a reversal of this initial counter-trend sell configuration from VLT trend line resistance.

Yesterday’s ES high at 1424.75 is the spotter signal high (unconfirmed), and so it becomes the first structural high candidate and I have marked it with a dashed magenta line.  That is now the hard deck for any bearish speculation–either it will hold, or it will not.  There is no margin for speculation otherwise.

As I mentioned previously, the very first level of support is at the bottom of the VST trident channel and the premarket low at 1407 touched that line.  The closing confirmation price for a spotter signal is at 1408, and that is the number we will have to see taken out on a close to confirm the spotter signal.

If selling begins, the minimum pullback for a potential structural low would be 1397.

If the pros want to take out all the recent bulls that have piled on in the past 14 days after the breakout at 1387.50 on August 3rd–that would be the next logical target.

Of course, if the tentative spotter high is exceeded, the whole setup is negated and we start watching for the next exhaustion point higher.

What is in play here is that breach of the VLT trend line and the overshoot to 1424.75.  I don’t suspect they will make this ideal ambush spot easy on traders–but the parameters for measure are laid out above.

.

.

.

Checking in with Stops and Targets, we see the countertrend sell setup at 1413.25 has found it’s initial target at the ideal entry zone between 1405 – 1407.  Counter-trend profits are taken in that zone and the stops for countertrend trades are at 1413.25, and trending long trades have the stop moved to 1405.25, so all is pretty much in agreement with my VST take.

This is the best setup bears have had in quite some time, so now watching to see if we get any follow-through, at least to under the minimum structural pivot target at 1397

…my .02

.

.

VLT Trendline

.

.

.

.

At long last, we are here at ES VLT trend line resistance.  This trend line resistance serves as an extremely important psychological target for many traders as it pushes the macro bearish market restraint to the very limits for technical analysts.

Way back in December of 2011 I posted extensively about macro structure and the importance of understanding the calculus of bull versus bear bias in trading strategy.  That was an important point to make, and for newer readers I would encourage you to reread that post at the following link:

http://stopsandtargets.com/members/futures/blog/?p=3600

Back then, I pointed out the VLT structure and pointed out the key pivots.  The VLT structure has been decidedly bearish since the March 2000 peak, but we are now bumping up against the tend line drawn from that peak at 1709 to the lower high at 1532.75 (adjusted for current continuous contract values).  The breaking of that trend line is a warning shot that something is potentially changing in the macro fundamentals–and if it is ultimately broken and a sustained breakout occurs–the next logical target higher would be the last lower high at 1532.75.

Remember, the classical definition of a bear market is a series of lower highs and lower lows–and a bull market is a series of higher highs and higher lows.  We are not there yet, but this is a spot to tune in and watch carefully with a full understanding of what is at stake from the macro perspective.

This spot represents an ideal ambush spot–and so I look forward keenly to see how the pros play this.  We could see either a sharp pullback from here, or we could see a potentially massive breakout fed by big-time bears being forced to cough up positions based upon the technical change shown above.  As I have been saying, this market is extended and clearly is being supported in a squeeze–what i can’t be sure about is whether this is distribution or if it is a sponsored squeeze by the pros to break the back of the bears.

There is definitely a macro trade setting up here–but we’ll have to see which way it goes from the VLT trend line touch.  As I mentioned previously, the setup is in place for eventual creation of new index spotter signals –but one should be extremely careful to wait for the trigger and then confirmation, as we could see a number of false alarms on the initial signals, as well, due to the nature of this setup.

The ideal VLT trade here has been long from 596.50, with this area representing a realization of the trend line target with expectation of commensurate profit-taking.  However, what remains to be seen is how much fuel exists to effect a breakout squeeze above that line.

All eyes are on the VLT trendline…

.

.

.

Nothing bearish occurs until at least the bottom rail of the VST trident channel (shown as a dark gray line of the chart above) is broken.  As I also mentioned previously, one probably does not want to be short above 1419.25

…my .02

.

.