ES Update

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Screen Shot 2013-02-28 at 9.05.21 AM

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Let’s start by reacquainting ourselves with the VLT setup…

The top of the old (now broken) VLT range is at 1519.50.  That is the key line that has been in play.  As I mentioned before, it is perfectly logical that we are seeing resistance here as profit is being taken on the breakout move up and through the last bastion of bearish hope, which was the VLT stop trove located above that October 2007 high.  That is where the pros knew they had to go to generate forced buyers (bears buying to cover and momentum breakout players).

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Screen Shot 2013-02-28 at 9.24.21 AM

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Zooming in to the daily bars we can see how the ranges are shaping up here…

We have a confirmed spotter and ST top at 1530.  The break of the old ST support at 1490.25 assures us of a new lower structural low–with the current candidate being at 1481.75.  For that VST low to morph into a ST low, we will need to see the next pullback hold above that line over the coming several trading days.

Thus far, the pullback action has been in a VST 3-move (corrective) configuration–>1530 to 1495 to 1524.50 to 1481.75.  The lower high of 1524.50 and the lower low of 1481.75 now define the VST range.

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Screen Shot 2013-02-28 at 9.28.41 AM

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Now, zooming in further to the hourly bars and the realm of the VST trader…

We can see how the VST trendline drawn off the lower high has lined up with that VLT resistance at 1519.50 creating a confluence of resistance in different timeframes.  Taken with the spotter and short-term high at 1530 that sets up an interesting counter-trend sell setup.

I mentioned previously that to set up a short-term bearish ‘M’ pattern (we already have the VST ‘M’) we would need to ultimately see a structural lower low form (1481.75 is that candidate) and then a lower structural high form.  The most direct path to attaining that could come on a push above 1524.50–but to set up properly, it would need to stay below 1530 (to avoid invalidating the top spotter setup).

So, the early line to watch is the resistance confluence at 1519.50.  If the pros elect to run the stops of that setup, the next higher target would be that small range between 1524.50 to 1530.  It is never easy for the bears, and I don’t suppose this setup will be either–if we are to get an eventual turn down and a second run at that 1481.75 area.

Remember that the top spotter has already attained the initial objective, which was to hit the stops under ST primary trend support at 1490.25.  That happened and we got the expected stop sweep/reversal move at that line with that short-covering from those who missed the profit-taking turn at 1490.25 fueling the current push back to test VST resistance.  For counter-trend traders, the hard stop for all short trades has to be at 1530, with a lower subset of VST counter-trend traders setting buy-to-cover stops just above 1524.50.

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Screen Shot 2013-02-28 at 9.46.27 AM

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For S&T trend traders, that was a pretty sweet short-term entry signal at 1490.25 and stops are now set to breakeven with the next upside target at 1530.

…my .02

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ES Update

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Screen Shot 2013-02-26 at 9.04.36 AM

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Okay, there is the bearish ‘M’ pattern I was looking for–with the lower right shoulder poking just above the key 1519.50 level (remember that was the S&T partials target in all time frames) to hit 1524.50 before starting the descent to hit the initial confirmed spotter target of 1490.25.  Pretty cool how that all works out, eh?

So, now that 1494.50 (VST range bottom) and 1490.25 (short-term primary trend line) have been breached–that changes things.  The initial spotter goal has now been attained and so 1490.25 becomes the new bull/bear line (replacing 1519.50) as the delineator between bullish and bearish momentum going forward.  That line could become a stop sweep/reversal line if the goal was to accomplish a short-term pullback with a sweep of the stops.

The ‘M’ pattern may have happened too quickly to set up a short-term sell, which as you may recall I said would require about a week of trading above the eventual short-term structural low, which is what we are looking for to form.  The poke below 1490.25 assures at least a lower low in the sequence–but we’ll need to see several trading days above the current provisional low of 1481.25 to establish it as a new short-term lower low and of course, any move below that line will reset the cycle clock–just as it did for the short-term on the move under that last provisional low at 1495.

So, the confirmed top spotter has done it’s job of pointing out the exhaustion of the move and now we are waiting to see if that high at 1530 will morph from a short-term pullback to an intermediate pullback.  The current intermediate primary trend line is at 1384 and the next intermediate support lower is at the 1462 area.  In between is the open gap from the new year squeeze at 1420.

In the VST timeframe, there is a support void under 1490.25 down to 1471.50.  That could mean one of two things here…either the pullback is going to stall near the 1490.25 area and then drift higher for about a week as a new structural lower high is built–or we could see increased weakness with a possible acceleration in selling if it becomes clear that short-term support after a stop run under 1490.25 has failed.

So, the line to keep an eye on is 1490.25.  That line has already been breached, so it is old support now–therefore short-term countertrend bulls (it’s been quite a while since I have typed that term) will be keying on the provisional low at 1481.75, with stops just below.

VST bears are in control under 1494.50 (old VST support/new resistance), which is where price is hovering as I type.  That line can serve as an intraday bull/bear line as we watch to see what happens on the stop sweep and recovery setup above 1490.25.  Under 1490.25, of course, is all bear in the short term.

Ya gotta love those confirmed spotter signals…

…my .02

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ES Update

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Yesterday’s close on ES was below the 1506.50 trigger, so we have a confirmed top spotter on ES at 1530…

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Screen Shot 2013-02-21 at 1.48.08 PM

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The screenshot above shows how the spotter signals from the signal matrix looked at Wednesday’s close.  We had 563 new spotter signals form, which is a a fairly good sampling of the roughly 4,000 tracked symbols.

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Screen Shot 2013-02-22 at 9.05.45 AM

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At yesterday’s close we had 437 confirmations to bring the total number of active confirmed spotters to 1073

With that confirmation, the hard deck now becomes 1530 for any speculative counter-trend trades.  As always, that number is an absolute value.  If it is exceeded by even a single tick, the setup is invalidated.  The initial target for a confirmed spotter is always the nearest primary trend line–in this case ST at 1490.25.  That is the line that must be crossed to flip the first major trend bearish.  If that line is crossed to the downside and held–the next support area lower would be a band between the 1446 to 1462 area.  For a larger bearish move to develop, 1490.25 must be taken out to the downside and held.

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Screen Shot 2013-02-22 at 9.28.19 AM

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I posted yesterday that I was looking for a pullback to between the then current price and the 1490.25 area to see a bounce develop.  We got that move to a low of the push at 1495, which stopped just short of flipping the VST trend under 1494.50.  So, the pullback thus far has not even flipped the VST trend yet.  As I mentioned above, bears need to get under the primary trend lines to seize momentum, and that hasn’t happened yet.

To build a higher structural low, if that is indeed the plan, ES will need to hold above 1490.25 for the next several trading days.  Looking ahead a bit, if that scenario were to occur, we would expect to see a rally up to perhaps 1519.50 and possibly above–but not above the spotter signal high at 1530 (which would invalidate the spotter).  If that rally to a lower high happens, we would then expect to see the bearish ‘M’ pattern I mentioned start to form.  The trigger for selling from an intact spotter would come later on an eventual flip of the new higher low–with the current candidate being yesterday’s low at 1495.  Now, of course, that scenario is out the window if 1495 is taken out–but that is the current bounce low that is in play.

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Screen Shot 2013-02-22 at 9.40.21 AM

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Looking at the trending setup on Stops and Targets, we see that ES is currently inside the ideal entry zone above 1490.25, and that line is also being referred to as the hard deck for ST trend following.  That is why I said that bears must take out that ST primary trend level to have a shot at extending the current push lower.

So, the trending setup here from the bounce is VST long with a stop/reverse just under 1494.25 and ST long with a stop/reverse just under 1490.25.  The trend is your friend until it ain’t…and though the confirmed spotter is screaming caution–we still need to see the trends start to flip to get more than just a minimal pullback to a new higher low.

…my .02

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ES Update

Screen Shot 2013-02-21 at 7.39.21 AM

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We have been keying on 1519.50 for some time now.  That line was the last lower high in the VLT bearish sequence and when it was broken to the upside, the secular bear market technically ended.  It is no surprise that we should now see a pullback develop from near that line…

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Screen Shot 2013-02-21 at 7.43.19 AM

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Yesterday brought the first long-term counter-trend sell signal from Stops and Targets at 1519.50, which was the partials profit target for all three time frames.  Price has since moved below the counter-trend ideal entry zone which was targeting the top of the trending ideal entry zone at 1476.

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Screen Shot 2013-02-21 at 7.50.56 AM

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In yesterday’s post, I mentioned that we needed to see a minimum pullback to the 1508 area to establish a new higher structural low.  That minimum target has been accomplished.  The old short-term trendline support was at an unsustainable high angle and so we are looking for a potential bounce to develop between the current area and 1490.25, which is the short-term primary trend line.  If ES dips below that line, that would flip the short-term trend bearish and we would likely start to see significant sellers.

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Screen Shot 2013-02-21 at 8.00.37 AM

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Yesterday also brought top spotter setup signals on all three futures contracts and 2/3 of the cash indexes (except NASDAQ Composite).  We would need to see a daily bar close under the trigger lines to confirm (1506.50 for ES).  If those top spotters confirm, then I will expound a bit more on the implications and potential lower targets.

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Screen Shot 2013-02-21 at 8.05.38 AM

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On the hourly bar chart above we can see that ES stalled just under my 1531 target (actual high was 1530) and the counter-trend sell came in at 1519.50.  The minimum target area of 1508 was breached, along with the VST trendline support.

I have had a ST  trend channel drawn on my charts for a while now but haven’t commented on it.  Note the bottom of that rising channel currently at about 1499.  That trident channel is what the pros have been using to guide the new year squeeze, and you can see how price began to diverge from the centerline just before the final pop and drop.  If that channel bottom were to be broken, I’ll start to get a lot more bearish.

Tops are usually a process, and if we were to get one from this spotter, I would expect to see an eventual bearish ‘M’ pattern form, which means we could expect a sharp rally to harvest the early bears eager to catch a turn–and if so, that is where the pros would establish their secondary short positions.  This is certainly the best that things have looked for bears in a while, but one day does not make a trend and we will need to see confirmation and the breaking of some key support levels to start to confirm a trend change when it does come.

The first thing I am watching on any continued weakness is the bottom of the rising trend channel at 1499, and then 1490.25 short-term support.  At the close, I will be keeping an eye on 1506.50.

All trends remain up > 1490.25, however, and we have what is needed to potentially form a higher structural low.  Let’s call 1506 the intraday bull/bear line and see how things develop.

…my .02

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ES Update

Yesterday I saw the first of the ‘new high’ headlines, and snapped a screenshot…

Screen Shot 2013-02-19 at 1.29.12 PM

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The reference was to new 5 year highs–but the all-time Dow mark at 14198.10 is still out there.

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Screen Shot 2013-02-20 at 9.18.53 AM

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The intraday chart above shows the next resistance at 1531 and then a void up to the next major target, which is an unfilled gap dating way back to September of 2000!

From here it would take a pullback to the 1508 area to establish a minimum higher structural low.  ES has not been allowed to pull back to set a new structural high since 12/19/2012, which is the last short-term pullback that set up the launch of the massive squeeze from 1384 on 12/28/2012!  This has been one heck of a squeeze with no escape for trapped bears and top-pickers.

On the other hand, Stops and Targets is now up the following from last signals…

Long-term = +372.50 (+32.24 %)
Intermediate = +304.75 (+24.92 %)
Short-term = +141.00 (+10.17 %)

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Today we get the FOMC minutes at 2 pm (New York)

All trends remain up > 1490.25, but we are approaching a resistance void above 1531, and those voids can often trigger pullbacks–in this case the minimum expected pullback would be to the 1508 area, to potentially set a higher low.  I am also watching for an eventual unanimous top spotter event across the indexes and futures on a close–with heavy confirmation from the Russell 3000.  This push has been amazing, but sooner or later it is going to start a pullback, so it is important to maintain profit stop discipline on those big gains and to watch for counter-trend warning signs that can signal potential weakness ahead.

…my .02

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