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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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