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In my last post I pointed out the bounce target at 1665.75 and the short-term primary trend line at 1670.50.  ES did just what we thought it would by rallying just enough to sweep the close-in bear stops back to the 8/15 high.  Once those stops were digested, the pros turned their sights on the stops under the bounce low (formed by the gap fill at 1635.50) under 1631.50.

Those stops have now been run and we are currently testing the bottom support target from my last chart at 1626.75

The last move from 1665.75 down to the local low at 1625.75 was intended to run those stops under 1631.50.  That line now becomes the intraday bull/bear line for day traders.  If the intent was to run the stops underneath–a move above could morph into a stop sweep/reversal.

As I pointed out before, ES is feeling around here for a short-term structural low, and possibly a new intermediate structural low depending how things go.

For today, the trading setup is simple–VST is bearish under 1631.50 and counter-trend bullish above.

If ES continues lower from here–the next support levels are at 1620.50 and then a major support level at 1612.50

ST trend is down < 1670.50
IT trend is up > 1566.25

…my .02

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Looks like we have a bounce working here from the gap fill target I pointed out at 1635.50

The local low at 1631.50 now becomes the bull/bear line as we wait to see if yesterday’s high of 1654.75 can be breached–which would be the first sign of reversal confirmation for momentum traders.

The local stop zone for bears who missed the cover signal at 1635.50 is between 1654.75 and 1665.25.  That is the area where the pros will find forced buyers, as the bears begin to cover.

Next VST resistance above is at 1665.75 and then the ST primary trend line at 1670.50

The descending bearish trident channel I pointed out at the counter-trend sell setup is currently near the old all-time high at 1685.  That channel top should contain any counter-trend bounce.  An eventual move above that top rail, however, would negate the bearish channel.

If 1631.50 can hold here it would become a ST lower low (in a bearish trending sequence) and the next structural target would be the eventual building of a new lower high.  The minimum target for a new lower high from here would be 1665.50, but could go as high as the bearish channel top rail.

The key numbers here in the very short-term are 1631.50 and 1654.75.  If that tentative local low holds and we get a poke above 1654.75, that could start the short-covering.

…my .02

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Stops and Targets has achieved the initial short target from the last (at the time counter-trend) short entry at 1679.75.  This now sets up a possible counter-trend long trade from this area.  The setup is all spelled out in the screen capture above.

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The session low has filled the first of two breakaway gaps at 1648.50.  The next unfilled gap lower is at 1635.50.

The old IT bullish trident channel bottom has been broken (dashed rising light green trend line on the chart above) and the short-term trend is now down under 1670.50

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ES is feeling around for a short-term lower low here and this area near the gap fill at 1648.50 and confirmed support at 1649 is the first candidate for a bounce.  If we don’t get a bounce here, the next major targets lower will be:  the open gap at 1635.50, long-term support at 1629.50, and then intermediate support at 1612.50 and finally rising intermediate trendline support currently near 1579.

Bears have the ball here under the short-term primary trend line at 1670.50, but we are on bounce watch at the targets listed above.

…my .02

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Here’s something we haven’t sen in awhile…a bearish break in the S&T short-term primary trendline!  S&T signaled a counter-trend sell at 1679.75 and trailing stops for that trade are now moved down into profit at the S&T short-term primary trend line at 1670.50.  If we don’t get a bounce after the stops have been run under 1670.50, the next target lower is at 1649

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Fine tuning things a bit using the VST time frame, we can see an intraday open gap at 1656 and the rising bottom rail of the short-term bullish trident channel just below there at the 1651 area–then the S&T short-term support target at 1649.

You can see where the top rail of the VST bearish trade setup I pointed out in my last post worked out nicely for three entry opportunities leading up to the plunge into the short-term bull stops under 1670.50.  Those stops were the primary target of the pros–as that provides guaranteed sellers to cough up shares at distressed prices to profitably cover their short trades initiated after the post FOMC distribution above 1685 was completed.

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Stepping back to take a peek at the big picture–it is clear that the partials distribution was initiated at breaching the old all-time high at 1685.  You guys may remember me saying at the time that target line was hit that it was time to book those accrued partial profits.  That’s exactly what the pros were doing as it took an entire month of squeezing the bears before the buying finally dried up and the pullback from those extended conditions began.

From a monthly bar perspective, ES would need to get below 1593.25 before any structural damage occurred–so there is plenty of room to pull back within the current candle shadow without affecting the bullish monthly higher low/higher high pattern.

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Moving in to the weekly bars, we can clearly see the ‘Obama Rally Channel’, courtesy of our friends in Chicago, and the weekly bars are currently in a downtrend under 1680.50; showing a lower high/lower low structure.  The last touch of the top of that channel was on the week of May 24th.  It remains to be seen if the boys will yank it back up there one more time before a more significant pullback begins–but for now, so long as ES is under 1680.50, the weekly trend is bearish.

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Moving in to look at the daily bars on the range chart we can see the two competing trident channels–with bullish shown as light green, and bearish shown as dotted red.  The trajectory of the last short-term advance was clearly unsustainable–and we would need to see a shallower angle build to keep the bull going.  First opportunity is in the current general area near the rising trident support rail (currently near 1651), and perhaps slightly lower at the open daily bar gaps at 1648.50 and then 1638.50–though that would break the short-term trident channel.

The first order of business here is to see what happens after these bull stops under the S&T short-term primary trend line at 1670.50 have been digested.  That was undoubtedly the primary target of this push down from 1705.

…my .02

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Yesterday’s bounce came right on cue inside the ideal buy zone at 1675.25

This morning, that bounce made it back to a perfect touch at 1694 of a descending parallel channel top rail (shown in light blue on the chart above).  From a VST perspective, there is a bearish lower high lower low structure in place and that is the setup those sellers are likely playing here.  The stops for that speculative entry are just above the descending red channel top, which represents the counter-trend trailing stop line from the 1705 ST high.  The last VST lower high was at 1697 and it would take a move above that line to run the bear stops and break the lower high sequence.

So, here we are between essentially a rock and a hard place for day traders watching to see how this goes from here.  A move above 1697 and the bears are on the run again–but a move below 1670.50 would put the bulls on the defensive.

…my .02

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