Happy New Year!

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Today is the last trading day of 2013.  We get a regular Globex close at 4:15 pm (New York) and the markets will remain closed on January 1st in celebration of the New Year holiday.  Globex will reopen on January 2nd at 6 am.

The daily bar chart above does a great job of summing up 2013 from a trading perspective…

The year 2013 opened with a gap up from 1396.50 that was never filled.  The low that first day was 1414.75, and it has been up ever since–to a recent high of 1840 (which may be eclipsed today to provide the appropriate year-end propaganda headlines).  That is a gain of 425 ES points in the past year!

The original January 2nd gap opening day bar targeted the LT trendline resistance at 1434.50, and once that trendline was broken on January 10th, it was off to the races…

In the year 2013, when five consecutive intermediate higher lows were built–there was not even one new intermediate lower high!

There were just three short-term lower highs built–but each of those led to a higher IT low, and all were Stops and Targets pullback buys, including the most recent one at 1754.

For any permabears out there who were trying to pick tops–the year 2013 was an absolute nightmare.

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For trend-following bulls, on the other hand, 2013 was amazing…

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Screen Shot 2013-12-31 at 9.26.33 AM Screen Shot 2013-12-31 at 9.26.42 AM Screen Shot 2013-12-31 at 9.26.51 AM

The three screen shots above show the last trend-following signals from Stops and Targets:

LT is up 62.45 %
IT is up 53.27 %
ST is up 3.78 %

…since last signals were generated.  Wow!

The S&T system works wonderfully, as has been proven time and again.

Looking ahead… Stops and Targets would signal the first short-term counter-trend sell on a move under 1805.25.  Until we get the first reversal signals from S&T–this market continues to chug right along on a $75 billion dollar per month, Fed-fueled, futures-driven, frenzy.  As I have said before, this is the ultimate Keynesian experiment playing out right before our eyes.  So far, so good (except for that whole accumulated national debt thingy).

Happy New Year to all.  See you back in 2014!

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ES Update

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The chart above sums up the recent action with key support levels shown…

The Fed announcement (and subsequent intervention) came right at the ES 1767 support line.  That nearly 50 point goosing in the space of a few hours took out all bearish structures (the pros were definitely dangling the hook for bears, as pointed out in previous posts) starting with the VST trident channel breakout at 1781, VST range breakout at 1786.25, and then the stops above the top of the ST range at 1805.25–where profit taking took place down to 1795.  The market was goosed again there and is presently back into the void > 1806.25

This is an engineered squeeze, and as mentioned earlier–there is simply no way to predict in advance how high or how long it goes.  The best strategy, as always, is to stay on the right side of the trends using the last pivot lows as guides–and that means bulls are in complete control here above at least 1760.75 (VST) and 1754 (ST) in the shortest time frames.

The first Stops and Targets ST counter-trend sell signal would trigger on a move under 1805.25, for the type A’s out there.

There are no more upside resistance targets in any time frame.  This is the granddaddy of voids and other than the bears buying to cover–one would have to be looney to chase a market this extended–so we all know what is coming eventually.  😉

S&T trend followers have huge gains here so just keep moving those trailing stops up.

The trend is your friend…until it ain’t.

…my .02

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ES Update

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Yesterday afternoon the Fed announced they would start start taking the crack pipe away from the addicts…so naturally, the addicts threw a wild celebration.  Does that analogy make any logical sense on the surface?  Of course not, but it deftly illustrates what I have been hammering home for many years now–the market does not move on news, but rather IS moved.  😉

Beginning in January, the Fed will trim asset purchases to $75 billion a month, a net decrease of $10 billion per month from current levels.  Of course, there is the not trivial matter of unwinding a Fed balance sheet close to $4 trillion dollars, but Bernanke has now successfully kicked that can down the road to Yellen, just as Greenspan did to him.

The hourly bar chart above shows the current setup.  As I mentioned in previous posts, the pros were indeed dangling the hook for bears and yesterday the counter-trend bear stops were again run at the top of the range.

Tomorrow is December options expiration day.  The pros have the market near all-time highs as we continue to float around in the void just above the last VLT (very long term) upside target, which was the old trident channel top rail (shown as a dotted magenta line on the chart above).  Note that yesterday’s pullback before the news launched from that back-kiss.

There is major concern from the big boys in the market about the effects of a Fed taper.  This is gamesmanship going on here, and as I mentioned recently, at the first sign of a break and hold under those trailing support lines–we are going to see major selling kick in.  THAT is why the market was goosed yesterday on the negative news release–and why we continue to carefully watch the last structural lows in the closest timeframes… 1771.50 (ST) and 1754 (VST) currently.

The bulls remain in firm control above the primary trend lines and there is simply no way to tell how long and how high a blow-off top could potentially go.  The best way to look at this is that one should not be short anything above those last structural low lines–nor should one stay long below.  A big move is likely coming once we break out of this 1754 to 1806.25 range…

…my .02

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ES Update

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As I suspected, the pros were dangling a hook to bait bears under the ST primary trend line at 1771.50.  They took out the backtest of the VLT trident channel breakout (dashed magenta trendline on the chart above) and then reversed at 1754.  As I type, we are seeing a nice squeeze from the stop sweep/reversal.

There is a convergence of upside resistance targets at about 1789.50 worth keeping an eye on.  That is where a potential back-kiss of now broken ST trendline support and the top of the VST bearish trident channel come together and is where we could see counter-trend sellers reappear, if it is going to happen.  Otherwise, if the reversal holds up and we get a breakout from the bearish trident channel, then 1805.25 is the next upside target.

A new ST lower low is guaranteed under 1771.50, and so that line is the current bull/bear line on any potential paradigm reversal if this push up stalls and reverses.  Pros know that traders see the possibility of a ST trend change here–and so this is a ‘whipsaw zone’ where the stops get wrung out before the real move begins.

…my .02

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ES Update ‘The Big Picture’

Okay let’s take a look at where we are using the new (March 2014) contract numbers…

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Monthly bars…

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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.

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Weekly bars…

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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

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Daily bars…

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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.

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And finally, moving in to the hourly bars…

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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.

…my .02

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