ES Update

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Screen Shot 2013-05-31 at 9.21.13 AM

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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

…my .02

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ES Update

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Screen Shot 2013-05-30 at 9.26.09 AM

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The weekly chart above tells the tale…

ES touched the top of the VST bullish channel on 5/24 at 1685.75

We got a spotter setup signal there (still unconfirmed).

Last week’s low was 1632.75

So far this week, we have an inside bar.

All it would take for massive selling to kick in is a break underneath 1632.75

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Screen Shot 2013-05-30 at 9.32.21 AM

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I pointed out the VST counter-trend sell at the retest of the 1672.25 gap fill and the hidden counter-trend sell zone.  Thought I had that channel pegged yesterday, but a late day save kept the spotter from confirming and also negated the VST trident.  The breakout and back test at 1646.50 of that now broken channel is VST bullish and that line can serve as an intraday bull/bear line.

I watched the internals yesterday and noted that the NYSE advance/decline line was absolutely terrible–at one point only about 300 advancing issues against more than 2400 decliners!  I also noted a big divergence spread between the futures and cash index prices–as much as 50%.  So, clearly, the pros have been banging away at the futures to do whatever they can to keep ES from falling below 1632.75, which is where the automated sell programs would kick in.

The early focus will be on yesterday’s bar range between 1638 and 1656.75, shown as a white rectangle on the chart above…

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Screen Shot 2013-05-30 at 9.42.50 AM

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The daily bar range chart above shows why.  We won’t see any selling pressure above 1638, but if that low were to break and traders sensed a shot at breaking out under 1632.75–the air pocket void of support on the chart above down to 1593 is obvious.  If the pros are looking to manufacture a higher short-term low, they will need to finish out the week above the key line at 1632.75.  Much is at stake here–and hence the defensiveness by the pros over the past few days.

So, as I have been saying–it’s really all about 1632.75 here in the short term.  Many things are aligned to suggest a tradable bearish pullback is possible–but until/unless that VST support at 1632.75 is broken, there is unlikely to be any significant selling pressure and all trends remain up > 1632.75

…my .02

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ES Update

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Screen Shot 2013-05-29 at 9.39.52 AM

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As expected, we got the stall in the counter-trend sell area pointed out in yesterday’s post.

On the chart above, I have drawn in a preliminary VST counter-trend channel from yesterday’s high at 1672.75.  The counter-trend short trade is working inside that dashed purple channel–but trailing stops placed at the descending top rail must be honored.  As I type that channel top rail is near 1658

Key numbers to watch today are the descending channel top, the spotter confirmation line at 1646.50, and the most important intraday line of all, which is VST primary trend support at 1632.75.

The last bullish push up to fill the last open gap (from the start of the 2000 bear market) at 1672.25 was so relentless that no pullbacks sufficient to create a higher short-term pivot have occurred since April 18th at 1530.75.  The current VST low at 1632.75 can morph into a ST structural pivot if price can stay above that line for a couple more days.  If that VST support at 1632.75 fails, however, the cycle clock restarts and we could see a sharp sell-off under that line.  So, if the pros are looking to put in a higher structural low–this area has to hold.  If price breaks out above the channel, the hidden bearish setup I pointed out yesterday is likely negated and there is no reason to be short above that line.  On the other hand–if price falls below 1632.75 and the spotter confirms on the close–bears could be in business looking for a pullback to short-term support below.

All trends remain up > 1632.75

…my .02

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ES Update

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Screen Shot 2013-05-28 at 8.48.33 AM

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The pullback to meet minimums at ES 1632.75 (pointed out in my last post) has held and is now the VST primary trend line–so finally, we get to move the trailing support line higher and have a clear sell point should this bounce eventually fail.

So, let’s have a closer look at what is going on here from a structural standpoint…

The top spotter setup at 1685.75 has thus far not confirmed.  It would take a daily bar close under 1646.50 for that to happen.

The two levels pointed out above; 1632.75 and 1685.75 define the new VST range and is shown as a bright yellow shaded rectangle on the chart above.  Inside that range are two crosshatch-shaded ‘ideal entry zones’–the light green one (1635.50 to 1649) defined the VST trade from the minimum support bounce and it has an upside target of 1685.75.

The other light red ‘ideal entry zone’ is for the more sneaky hidden trade setup, which is a possible counter-trend sell in the short-term timeframe that would target closest ST trend support at 1593 (which would be the first spotter target, should it confirm).

Now, it should be said that all trends are definitely up > 1632.75–but we have a bit of an unusual circumstance here with a (so far unconfirmed) spotter and an extended run from ST support–so it bears watching (pun intended) to see if we potentially get selling from inside the shaded red area.  If we were to get selling followed by a break of the VST support trendline and then a close under 1646.50, then we might have more downside to come.

That said–it is important to be cautious in these situations and to stay on the right side of the trend as long as possible.  Patience is key when looking for a paradigm shift–but as crazy as it may seem with the Dow futures up 120 points before the open–until/unless this range is broken to the upside and the spotter is invalidated, the counter-trend bears have an outside shot at catching a foothold if the spotter eventually confirms.

So, next trending upside target is the stops resting above 1685.75.  That is the VST trade.  Next upside target for ST /IT/LT traders is the all-time high at 1691.

On the other hand–if we get a stall underneath those targets…the key line in play underneath is VST support at 1632.75.  If that VST primary trend line were to be crossed, everything changes and we start looking for a second leg down to the range of 1593 to 1617.50.  For those so inclined, 1660.50 can be used as an intraday VST bull/bear line.

If ES holds above 1632.75 for the next several days, we would eventually see ST primary trend support also reset to that line.

The trend is your friend until it ain’t and all trends remain up > 1632.75

…my .02

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ES Update

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Screen Shot 2013-05-23 at 9.02.48 AM

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Okay, that was a nearly perfect setup…

In my last post I wrote:

“So, keep an eye on the previous day’s lows going forward (because almost everyone else is at this point).  That is what must break (and hold) before any tradable pullback can occur.  In an eventual ideal Stops and Targets spotter  setup–we would see a poke above the previous day’s high, followed by a sell-off that closed negative on the day.  That sell-off would be validated by massive numbers of internal spotter signals from the Russell 3000.”

ES got the gap fill target at 1672.25, then yesterday we got the ‘news and noise’ for the blowoff stop run that stalled short of the all time high at 1691, and then we got the sell-off into the close and a break under a previous day’s low (finally).  Pretty cool how all that works out.

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At the close yesterday Stops and Targets issued unanimous spotter signals across all index futures and cash indexes and we saw a pretty healthy confirmation from the Russell 3000, with 779 new spotters…

Screen Shot 2013-05-23 at 9.11.58 AM

 

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As always, spotter setup signals need to be confirmed and for ES that would take a subsequent close below 1646.50

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Screen Shot 2013-05-23 at 9.15.32 AM

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The initial sell-off from 1685.75 has already reached the first S&T target of 1635.50, which is long-term support.  A move under that line would trigger the first Stops and Targets counter-trend sell.

On the hourly chart at the top of this post I have drawn in the ideal entry zones for the long-term timeframe (1,635.50 to 1,649.38) and the next target below, which is the short-term ideal entry zone between 1593 and 1617.50.

The first line in play this morning will be that long-term support at 1635.50 and we’ll call that the bull/bear line on the day.  If ES rallies, 1660 would be the first target to the upside.  If we get a counter-trend sell under 1635.50 –then the short-term ideal entry zone comes into play underneath.  If the spotter is confirmed and selling accelerates, the initial spotter pullback target could be as low as 1533.25 (ST primary trend support).

Minimums have been met at the early low of 1632.75 for establishing eventual VST and ST higher lows.  We haven’t seen that since April 18th, where the last leg up kicked off.  As I mentioned in my previous post–this last run was very extended from supports, and so there is the possibility here for additional downside if 1635.50 support fails.

…my .02

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FYI: The early advance line is 404 to 2319.  That is very weak.  If the lows break, this could get interesting.

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