Okay let’s take a look at where we are using the new (March 2014) contract numbers…
Starting with the monthly bars for a long-term perspective…
Things were pretty ugly at the bottom back in March of 2009 after essentially falling off a cliff in October of 2007. The market had gone from 1496 down to 559.75 (adjusted for new continuous contract pricing). There weren’t many bulls left, and the bears had been in complete control for almost a year and a half.
The American Recovery and Reinvestment Act was signed into law February 17, 2009 by Barack Obama–and the market promptly bottomed and turned on March 6, 2009. Since that stimulus package was enacted, ES has climbed from 559.75 to 1806.25, or about +327%, more than tripling in value.
From the low, there were several specific upside technical targets; 1) breaking the descending red VLT trendline, 2) setting a higher VLT high to kill the secular bear market, 3) breaking the all-time high, and 4) tagging the top rail of the VLT trident channel. All of those technical goals have now been met, and exceeded. In other words–we are at the ‘void of voids’ for resistance.
We are seeing a pullback on the current monthly bar that is testing the now broken top channel of that VST trident, which was the final technical target.
The previous monthly bar low was 1730.25–and that is where the first of the LT sell stops are congregating. Remember that a bullish trend is defined as ‘a series of higher highs and higher lows’. December is currently showing an ‘inside bar’ between November’s high and low bar shadow range of 1806.25 and 1730.25. If we were to get a break below 1730.25, that would bring sellers in this time frame, otherwise this is just sideways action from a monthly bar perspective.
Moving in to weekly bars to get an intermediate perspective…
I have marked all of the monthly cycle lows on the chart above with green dots. Since the all-time low in 2009, there have been a total of sixteen structural lows built on the weekly bars. Of those sixteen, only three were ‘lower lows’, and two of those were immediately reversed on stop sweep/reversal setups (I love those). The last tradable IT pullback ended in October of 2011. The broken trendline resistance shows where we had the bearish trendline broken from the last ‘lower high’ and the market has been virtually straight up ever since–with seven straight higher lows!
This chart is one to really keep an eye on as it shows clearly the strategy and technique used by the pros to guide the market using the stimulus money. Once we see a weekly chart structural low fail–that will really mean something. The last structural weekly low was at 1633.75 (which lines up closely with Stops and Target’s intermediate primary trend line).
We could be in the process of pulling back to set up a new higher weekly time frame low if ST primary trend support is flipped, and from the current setup those pullback minimum targets would be either under 1748 or 1730
Moving in to the daily bars, we can see that the ST trend is in jeopardy of flipping bearish here at 1771.50 area. If it does, the next lower ST stops are under 1730 area, with the top of the IT range breakout at 1692 and then finally IT trendline support (currently near the 1670 area) being the obvious macro targets lower.
I think the pros have fun playing with these chart setups, as can be attested to the recent local high set at 1805.25 coming just 1 point under the spotter high at 1806.25. You may recall from a recent post I wrote that to set up a ST bearish pattern would require a lower high under 1806.25 and then levitating long enough to set up a new higher low at 1771.50. Could the pros have cut the margin any thinner? Those guys make me chuckle sometimes. So, with the absolute tiniest possible margin of technical bearishness possible, I think that the pros might be dangling the hook here to see if any bears bite. That is why 1771.50 now is in play as a possible stop/sweep reversal setup. To keep it simple, though, ES is short-term bullish above and bearish below that line.
And finally, moving in to the hourly bars…
The VST trident channel I drew in from that marginal lower high on the last hourly chart has worked well. ES has taken out the stops under the last ST structural low and we are seeing the aftermath of that stop sweep playing out now.
As I type, the intraday low has reached down to touch the top of the old VLT trident channel and has also tagged the 11/13 breakout line at 1767. If this is destined to become a stop sweep reversal play, that might do it for the downside as we have a void below those numbers. If not, the next VST target lower is at 1748.
Bull/bear line is at 1771.50. VST and ST action is bearish below and reverts back to bullish above.