ES Update

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The markets reopen today after a two day closure due to Hurricane Sandy.  Today is the last day of October and as the chart above shows–the entire month thus far has been an inside bar between the September monthly range of 1387.50 to 1468

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Zooming in to the daily bars shows the short-term pullback stopping above the key 1387.50 level and as we near the open of the cash market we see that there is an opening gap at 1407.50, and ES is bumping up against resistance at the bottom of the old VST/ST range at 1416.50.

To generate significant selling, bears will need to get under 1387.50.  If that were to happen, the rising LT support trend line would be the next target lower.

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Zooming in one more magnitude to hourly bars we can see how the pros have generated a series of marginally lower lows inside of the void I pointed out under 1416.50.  I count six marginal lower lows between 1402 and 1393

The early line in play is Stops and Targets short-term primary trend line at 1416.50.  The short-term bias is bearish below, but would switch to bullish above.

As I mentioned above, if the provisional low at 1393 is broken that would open up a possible move to take out the stops under 1387.50  If, on the other hand, ES moves above 1416.50, the next upside target is resistance at 1424.  Just above 1424 is the top of the short-term bearish trident channel where professional bears are likely trailing stops.  If that channel were to be broken, the next upside target would be the previous weekly bar high at 1433.25 (weekly range shown on hourly chart above above as dark grey dashed lines at 1433.25 and 1394.50).

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Stops and Targets’ short-term primary trend line at 1416.50 is the line in play.  Short-term and very short-term bias is bearish below, but both would switch to bullish above.

…my .02

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ES Update

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As expected, 1414.50 has indeed been strong resistance as ES continues to feel around here for a VST bottom.  The key features in play are support at 1398.25, the major stop level at 1387.50, and then the bottom of the trident channel just below.

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The range chart shows the major support at 1387.50.  Under that pivot, a number of sell stops are undoubtedly gathered–as traders predictably use those areas for stop placement both for long side protective stops and also for momentum entries to the short side.  If the pros decide to dip under that line, it will certainly create more sellers–but doing so would not be without risk as it opens the possibility of being overwhelmed by more sellers than could be absorbed.  If I have this right, this pullback is accumulative in nature and hence the modestly lower lows.  If, however, we don’t bounce near the current void area between 1398 and 1414.50–the next major play lower will be at 1387.50

VST/ST trends are down below 1416.50, but if that line is crossed to the upside–we could see shorts begin to cover and others buying the dip.

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The monthly chart above shows an inside bar–and the key downside number there is again last month’s low at 1387.50.  Technically, no structural damage has been done above that line–but if we were to get a dip below that fails to recover…eyebrows would start to raise.  The pros are exerting pressure and will continue to do so until the order book swings in their favor.  When enough traders are on the other side, they will reverse it.  If they don’t get that imbalance here, they will most likely next go to 1387.50 to unlock the next level of sellers.

…my .02

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FOMC Day

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ES is presently in the void I posted about yesterday between 1414.50 and 1398.25.  This is exactly the place I would go if I were pulling the levers.  On the chart above one can see that 1414.50 is acting as resistance, as expected.  I have drawn in a light gray trend line that shows where the most aggressive bears are trailing stops ahead of today’s FOMC announcement at 2:15 pm (New York time).  http://www.bloomberg.com/markets/economic-calendar/

In the VST and ST, the trends are down under 1416.50, but would reverse on a push above.  Still watching for signs of the pro’s boot coming off the bulls necks.  A break of the light gray trend line would be the first place where buy/buy to cover stops are entered.

I have again drawn in the potential bearish trident channel along with the next downside targets if we don’t get a reversal today.  Stops and Target’s new ST primary trend line at ES 1416.50 should continue to work as the VST bull/bear line here.

The pros are very good at what they do, and yet again we have ES sitting at a point of maximum pressure ahead of the FOMC announcement.  They do have a flair for the dramatic, don’t they.

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Let’s take a look at the ‘Big Picture’ ahead of today’s announcement.  These are some of the factors being considered by the FOMC as they continue to engineer a course…

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ES Update

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Still watching for a bullish capitulation and signs that the pressure is off to the downside.  As expected, 1416.50 held to the downside on the close yesterday (daily low was 1416.75)…but overnight that new range bottom was broken–ensuring yet another lower low in the bearish pullback sequence since the major resistance target at 1467.50 was tagged.

ES 1415.50 is the last VST downside target before a void opening down to the 1398-1402 area.  I like to watch for support/resistance voids as that is where the pros will often push to find the last of the panic stops to raid before reversing.  So, this morning the early line to keep an eye on is 1415.50.  If I were pulling the levers and trying to raid as many stops as possible, this is where I would go before covering and reversing.  However, if ES can’t recover above that last VST support at 1414.50 and rally after the stops are raided–the bears will have won the range breakout and we could see a breakdown as the selling compounds.  As always, it is a game of pressure at the edge of a void.

Interestingly, ES now has pulled back sufficiently to establish a potential IT pivot–and we are also quite close to a back-test of the major VLT trend line breakout (about 1408), so really, this could be a very good spot for a reversal.

We’re into the stops here at the edge of the void–so let’s see what happens next…ES 1416.50 remains the VST/ST bull/bear line with price action bearish below–but would reverse to bullish on a move back above.

…my .02

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ES Update

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We are now into week 6…or the 26th trading day since ES touched key resistance at 1467.50

The weekly bar chart above does a pretty good job of summing up the ‘big picture’.  The pullback since 9/14 has been extremely shallow thus far, and mostly has consisted of marginal new lows while staying within striking distance of the increasing number of bear stops gathering just above the local high at 1468.

Bulls and bears both are undoubtedly frustrated and maybe a bit nervous at the market’s rangebound trading during this consolidation period under the last confirmed resistance target at 1467.50.  The pent-up energy is collecting for a powerful move.

As I have mentioned several times, much is at stake here in the very long term.  We had a major VLT trend line breakout in September which opened up a possible run at breaking the back of the technical bear market.  The last VLT structural high was at 1525.75 in October of 2007.  That is the number that would ultimately have to be exceeded to officially end the VLT macro bear market.

The vertical dotted blue line shows the start of the current US presidential administration.  No matter your personal politics, the pattern of a sustained push out of a frightening bear market collapse into recovery all the way back to the start of the bearish collapse is unmistakable.  Many will speculate and argue as to whether this recovery has been artificially stimulated–but that really doesn’t matter, what does matter is that the chart reflects the performance reality of the broad markets over the past four years.  The question now is and has been–will the market finish the job and ultimately take out that last lower high at 1525.75 (VLT macro lower high in a sequence of lower highs and lower lows)–or will the rally fall short and plunge back toward that VLT support trend line on the chart above.

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The hourly bar chart above assumes that the VST low at 1416.50 will hold today on the close and morph into the new short-term trading range bottom.

The current short-term primary trend line has now been crossed 10 times as the pros have been putting the pressure on bulls during this consolidation under 1467.50.  If we get a renewed push toward 1468, that will all make sense as the pros need to shake loose shares during a consolidation.  We’ll see if 1416.50 holds here, and if so, we should eventually see a renewed push toward resistance and the trove of stops above.  If, on the other hand, 1416.50 fails–the VST/ST cycle clocks would reset and we would again be looking for the next lower low.

The range is now 1416.50 to 1466.  If 1416.50 fails, the next VST target lower is the stops under 1414.50 with a void then opening down to 1398.  The bulls need to hold here if the idea is to take it back up.  If not, then watch 1414.50 as the next possible VST stop sweep reversal line.

The pro’s boot is on the necks of the bulls–what we are watching for is a sign of that pressure lifting and 1416.50 remains the bull/bear line.

…my .02

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