Option Rollover Day

Volume shifts from the December 2013 to March 2014 futures option contracts today with a difference of –6.25 points from ESZ13 (December) to ESH14 (March).

All previous chart numbers have been adjusted to reflect the new contract pricing—so, for example, the short-term primary trend line from the December contract at 1777.75 will now be 1771.50 on the March contract, and so forth.

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Screen Shot 2013-12-12 at 10.12.31 AM

We got a new short-term higher low at 1771.50 (1776.75 old contract price) yesterday at the close, as expected.  That line now becomes the key bull/bear line.  We are getting the initial stop sweep underneath this morning during the chaos of contract rollover–so now we watch with great interest to see which side of that line price moves.  If we get a breakdown that holds below that line, that would be the first paradigm shift.  Otherwise, a quick dip below that runs stops and then reemerges above would be a stop sweep/reversal.

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ES Update

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Screen Shot 2013-12-11 at 9.51.25 AM

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Today is ‘Weird Wally Wednesday’, referring to the week before expiration and the sometimes violent moves just ahead of contract rollover day, which is tomorrow.

We have five hourly bar touches at a slightly lower high at 1811.50 followed by a bearish stairstep move down…

I have drawn in a bearish trident channel for guidance, just as I did last time we had this particular setup.  If we are going to see an extension of the move down then that descending trailing stop line should not be broken on a rally–otherwise the odds are that a new higher high is coming.

Next target lower is the bottom of the rising blue bullish VST trident channel near 1790.50

If ES remains above 1777.75 today, that line should become the next higher low in the short-term time frame and also the new primary trendline.  In a bullish progression, that would then become the line that must be crossed and held to flip the first major trend down.  It is also where stops will be automatically advanced by the automated trading platforms.

I have also drawn in what will become the new short-term ‘ideal buy zone’ for the ST time frame, if 1777.75 holds.  The top of that new zone is at 1786.50 and there is also an open gap inside at 1783.75

Okay, it’s limbo time…let’s see how low they go

…my .02

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ES Update

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Screen Shot 2013-12-09 at 9.45.55 AM

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We haven’t seen a ST lower structural high on the daily bars since August!

That last red descending trendline shown on the chart above was broken on 9/4 just ahead of the December contract rollover on 9/12.  There was a pullback to retest that trendline breakout level to an IT low at 1640 and then it has been essentially straight up since.  Bears who missed that turn (pointed out at http://stopsandtargets.com/members/futures/blog/?p=6311 ) and bulls who missed the IT buy there have been given no quarter in a squeeze that has now advanced approximately 170 points without a tradable pullback.

That low at 1640 coincided with a FOMC minutes release and more importantly, with the news that Janet Yellen would be the new Fed Head.  Well, here we are closing in on the next quarterly contract rollover date (12/12) and the futures are near a breakout to yet another new high > 1812.50.

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Screen Shot 2013-12-09 at 10.00.18 AM

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We are all familiar with the pattern by now, and so the watch is on to see if the current VST range bottom at 1775.75 can hold in there on the next pullback to become the next ST higher low…

Remember–the basic definition of a bull market is ‘a pattern of higher lows and higher highs’.  Until such time as we see the building of either a lower high or the break of the last higher low, the paradigm remains unchanged.  That means we would need approximately a week below a lower high than the last local high (1812.50) or a break under the last higher low (1736.50) from the current setup for something to change.  Of course, if we get a new high > 1812.50, that cycle clock starts all over again.

Next target higher is the bear stops > 1812.50, and next target lower is the VST support at 1799.75

Since we have another void > 1812.50, there is the possibility for a stop sweep/reversal around that line once the bear stops have been wrung out again, if we get a new high.  It’s been counter-productive to speculate on the downside reversals for anything more than quick scalp trades, but eventually we will see at least a ST pullback, which is by now technically long overdue.

The trend is your friend…until it ain’t.  The bullish trend officially changes only on a break and hold under the last higher low.

…and so we wait.

…my .02

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ES Update

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Screen Shot 2013-12-06 at 10.44.03 AM

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Okay, we got the expected bounce from the VST ideal buy zone between 1774.50 and 1784 (ES 1777.75 was the bounce low).  Price has made it back up to the old bull/bear line target at 1799.75 and has touched the center of the VST trident channel and paused just below the ST trendline break at 1804.25.

As I type, the internals look pretty strong–but we’ll see how it goes at this resistance band right here.

VST primary trend stop is currently at 1774.50 and we are watching to see if 1775.75 can be established as a higher VST low, or if we instead see the formation of a lower high from 1812.50.  The current VST action is, of course, range-bound between 1812.50 and 1774.50, as we await the next structural pivot formation.

…my .02

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Update @ 10:45 am 12/06:

I have added a dotted red VST counter-trend trident channel.  If the pullback here is from a ‘lower high’ under the ST trendline break, that channel should hold.  Otherwise, a rally above the blue trident (VST bullish) centerline would target a new high > 1812.50

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ES Update

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Screen Shot 2013-12-04 at 8.47.51 AM

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As an addition to my earlier post today, I am including the hourly chart showing the current status of the VST and ST support levels.  ES is nearing the VST ideal buy zone between 1774.50 and 1784, which is formed from the breakout on 11/13 and the new local high at 1812.50.  We also have a confirmed top spotter signal on yesterday’s close, with the confirmation line at 1802.75.  There was also a break of ST trendline support at 1804, and finally, we have our first VST counter-trend sell signal at 1799.75

Let’s use that VST countertrend sell signal at 1799.75 as the intraday bull/bear line, and see how it goes here at the test of the VST/ST breakout zone above 1773.25 and that VST counter-trend sell line.

FYI: The VST trailing stops for trend-following bulls are currently sitting under 1774.50

Remember from my earlier post that what really matters in the current configuration are the location of the last higher lows–and those are at 1774.50 (VST) and then 1736.50 (ST).  Those lines are what would need to be flipped and held for this to morph from a simple pullback into something more meaningful.

…my .02
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Update 12/4 @ 8:50 am:

I just noticed that the top of the VST ideal entry zone was incorrectly labeled yesterday as ‘1778’ when it should have been 1784.  I have corrected it in the chart above.
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