Today is an important day from a structural standpoint…
If ES can hold above 1632.75, the short-term primary trendline will move up to that number. For the past seven trading days the range has been decided by the two-day pullback that occurred May 22 to 23 and that range is illustrated by the yellow rectangle on the chart above.
As I have pointed out–the setup has certainly been there for something bearish to develop–but so far, every approach toward 1632.75 has been bought and that has created the bottom of a pennant pattern that is shown by the blue trend lines in the chart above. Generally, pennant patterns are continuation patterns in the prevalent trend, which means odds are this sideways consolidation will resolve higher. However, pennant patterns can also occur at the start of a paradigm shift. The key here is to watch for a breakout of that consolidation within the constricting range. Often, that first breakout will point toward the direction of the next big move.
Nothing truly important happens in the way of a potential paradigm shift until/unless 1632.75 is broken to the downside. The potential sellers are under that line and if that support holds the inevitable outcome is to continue to drift higher due to a lack of selling pressure.
I received a few emails yesterday wondering about the bearish tilt to my commentary–especially after the breakout of the VST counter-trend channel, which seemed out of character to some considering my usual disdain for top and bottom picking before a confirmation is made. I was merely pointing out that a good number of things have been lining up for a potentially shocking downside move–but perhaps I should have been more clear in emphasizing that could happen ONLY if that trap door at 1632.75 were to be opened.
All trends remain up > 1632.75