Russell Rebalancing and the Bilderberg Summit

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Today is a very significant day in the markets…

Each year a snapshot of the market is taken on the last day of May to be used to reconstitute the Russell Indexes:

Russell Global Indexes
Russell U.S. Indexes
Russell Frontier
Indexes
Russell Stability Indexes™
BATS Chi-X Europe Russell Indexes
Russell-Axioma Factor Indexes
Russell Equal Weight Indexes
Russell Europe SMID 300 Indexes
Russell Eurozone SMID 150 Indexes
Russell Fundamental Indexes
Russell Geographic Exposure Indexes
Russell High Dividend Yield Indexes
Russell High Efficiency Defensive Indexes
Russell-IdealRatings Islamic Indexes
Russell UK Mid 150 Indexes

More than four trillion dollars in equities worldwide are benchmarked against those indexes–so today’s close is a very big deal.  The following link gives a very good topical overview of what is happening…

http://www.russell.com/documents/indexes/reconstitution-presentation.pdf

May is the ‘ranking month’ and June is the ‘transition month’.

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.Today is day 2 of the annual Bilderberg Summit, which for 60 years has been the meeting point for the global elite and particularly the hand-selected minions who do their bidding.

MP Michael Meacher describes Bilderberg as “the cabal of the rich and powerful who are working to consolidate and extend the grip of the markets”. 

They now rule with such impunity that the once secret meetings are openly flaunted.  At the conclusion of this meeting, new edicts will undoubtedly be enacted–so beware in the coming months.

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Screen Shot 2014-05-30 at 7.47.42 AM

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The markets have been locked in a tractor beam of unnatural vertical ascent since 2009 and as I have pointed out several times in the past–we will know when the paradigm has changed when the weekly chart shown above suffers a break of the higher low progression (highlighted with green dots) that does not recover.  We have had exactly one occurrence of that phenomenon in the past five years (highlighted in yellow on the chart above).

The last higher low was at 1803.25 and that is where all the big boy trend following stops are currently congregated.

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Screen Shot 2014-05-30 at 7.59.22 AM

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Zooming in to the daily bar range chart, we can see that the ST and VST range breakout at 1898.50 marks first support and would be the initial counter-trend sell signal from Stops and Targets on a pullback.

It’s been boringly predictable lately–and the New York guys are starting to whine a bit that the lack of volatility is hurting business and their firm’s bottom line revenue.  That volatility has been arrested by the Chicago futures guys and Chicago > New York since 2009.  But in order to attract the revenue that comes from speculative trading…eventually, the pros are going to need to take the foot off the gas pedal–lest all the commission paying customers go away.  First sign of a potentially tradable pullback is usually a series on unanimous confirmed top spotters across the indexes with massive internal confirmations in the Russell 3000, and so until we get that–or unless we start to break some sort of support–the game continues to be pushing the trailing stops up under the trending investments, as is shown by the massive net gains in Stops and Targets for the ES since the last trend start signals:

Long-term:  +791.50 (+70.37 %) (last signal November 28, 2011)

Intermediate:  +169.25 (+9.69 %) (last signal February 6, 2014)

Short-term:  +82.25 (+4.48 %) (last signal April 15, 2014)

 

Be sure to keep the big picture in mind as coming staged events unfold.  Remember that the weekly chart is the roadmap and preferred trading timeframe of the folks currently meeting in Copenhagen to decide your fate.

…my .02

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ES Update

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Screen Shot 2014-05-23 at 8.43.54 AM

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Screen Shot 2014-05-23 at 8.49.23 AM

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In my last post I pointed out the bounce point at 1859 where counter-trend shorts should be covered and where trend followers should re-enter.

That was a nice little move down from the counter-trend sell at 1892.50 for bears who covered in the S&T ideal entry zone–and was also a nice re-entry to get back on trend for bulls.  Now we are back up to the original counter-trend sell area at 1892, which lines up with the center of the light green bullish trident channel that I also pointed out recently.  That channel has been working well, so now we have to watch and see what happens as we get a touch from below on a bounce back to that centerline.

The VST and ST range is now 1859 to 1898.50.  The stops on both sides are located just above (for bears) and below (for bulls).  We have seen this exact same manufactured move many times in the past, and frankly, the pros need to mix up the playbook a little–lest they give up the house advantage to predictability.

S&T is looking for 1898.50 as the next upside target–but the ST primary trend line has now been raised to 1859 to protect the last entry signal at the ideal entry zone.

The only question here is which stops they go for next…the bear stops from all those who missed the turn at 1859 are closer, but let’s keep an eye on the trident center line kiss and last counter-trend sell line here at 1892.50 to see if we might get a lower shoulder to get the bears excited again and back into the game.

…my .02

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ES Update

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Screen Shot 2014-05-15 at 11.44.07 AM

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Screen Shot 2014-05-15 at 11.38.56 AM

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We are in the midst of selling here from the ST counter-trend signal setup at 1892.50 that I pointed out in my last post.  That signal continued through the old range top at 1886 and has now entered the ST ideal entry zone between 1854.50 and 1862.38

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Pretty standard pullback stuff, so far, but let’s take a look at the higher timeframes to put the current move in a ‘big picture context…

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Screen Shot 2014-05-15 at 11.12.03 AM

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Starting with the monthly chart, we can see that last month was an ‘outside bar’, in other words–the stops were swept on both sides, which is a difficult trading environment for most traders.  Last month’s bar shadow is 1892.50 to 1803.25.  The IT breakout > 1892.50 took out the last of the bears before retreating into the current pullback.  From a monthly bar perspective, those trend traders aren’t going to be particularly concerned about a pullback to anywhere > 1803.25.  So far, what we are seeing is a higher low and a higher high on the current bar–so barring another outside bar, the odds greatly favor the bulls, though some top-pickers would see potential bearishness under last month’s closing price of 1878.  Of course, a journey of a thousand miles begins with a single step–but to my thinking, we don’t have spotters in place and so the most likely outcome is eventual higher highs until/unless we were to break under 1803.25

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Screen Shot 2014-05-15 at 11.23.30 AM

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Zooming in to the weekly bars, which are the key road map, last week’s bar low was 1854.50 but the real number to keep an eye on is the tentative higher low that would build at 1803.25 at the close on Friday if ES stays above until then.  The pros have been building these 4 bar weekly pivot lows since 2009–and as I mentioned in my last post, we will know when the paradigm has changed when one of those higher lows gets broken to the downside and cannot recover.  So, again; 1803.25 is the big support line in play and is where trend stops are congregating in both the monthly and weekly timeframes.

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Screen Shot 2014-05-15 at 11.30.41 AM

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Moving in to the daily bars, we can see that ST trendline support has been broken (which triggers some close-in stops) and the next clear target lower is the bottom of the ST range at 1854.40.  As shown in the Stops and Targets screen capture above, ES is now inside the ideal buy zone where clever counter-trend bears will cover at least partials and ST trend followers will likely take a stab on new adds, but with tight stops underneath.

It wouldn’t be too surprising to see 1854.50 taken out–especially if the pros are intent on filling the remaining breakaway gap underneath at 1839.50, but we could be cruising down to a bounce point somewhere in this general area.  So head’s up to bears who are in profit from the counter-trend sell signal at 1892.50

The first trend doesn’t flip until/unless 1854.50 is taken out and held–so that is where bears would have to go to seize momentum.

That was a good counter-trend sell signal from 1892.50 and this is likely a nice spot to start locking in profits, just like the S&T analysis says.  If 1854.50 is taken out, then 1839.50 is the next likely target below.

…my .02

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ES Update

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Screen Shot 2014-05-13 at 11.02.45 AM

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Yesterday, we had an intermediate term breakout on a move above 1892.50.  That officially retired our last confirmed top spotter from April 4, 2014.  That spotter signal achieved almost 90 points of downside and established a new IT higher low at 1803.25.  From that IT turn we have now seen a little over 90 points of upside.

We now have a second breakaway gap at 1873.50 along with 1839.50.  As I mentioned before, those type of gaps usually get filled eventually–but for now, the bears who missed the turn are again being squeezed into submission above 1892.50.

That line at 1892.50 now becomes the line that counter-trend traders will be watching for a possible stop sweep/reversal play.  A move back under 1892.50 would trigger a ST counter-trend sell signal from Stops and Targets.  The key words are ‘counter-trend’.  All primary trends remain up > 1854.50

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Screen Shot 2014-05-13 at 11.15.02 AM

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I would like to return your attention to the weekly chart above, which I have pointed out several times in the past as being the grand road map to what the pros have been doing…

At the last IT low I pointed out that there had only been three previous instances since 2009 (see shaded ovals on the chart above) where a weekly structural pivot low had been broken–and in two out of three (now three out of four) prior instances it had been a stop sweep/ reversal buy signal.  It was at the last break under 1747 where a number of very large bearish bets had been placed looking for a paradigm shift.  As I pointed out at the counter-trend buy signal at a cross back above 1747, that was most likely a sucker’s bet by the bears.  That last ST counter-trend buy at 1747 has now gained 150 points, which is wonderful for trend followers–but disastrous for careless bears who shorted that break under 1747 and did not stop out and reverse after the stop sweep.  May options expire this coming Friday and we are likely seeing the wrap-up here of that trap and reverse move by the pros as the last of the bears are being squeezed out.

The key numbers to take away from that weekly bar chart above are 1854.50 (the low of last week’s bar) and the next likely higher structural low at 1803.25 (which will become the official mark at the weekly bar close on Friday).

That weekly bar chart above is the key to understanding the ‘big picture’, and until we see a change in that very controlled paradigm, that is how the pros have been doing things since 2009, and likely will continue to do things into the near future.  So, with that ‘big picture road map’ firmly reestablished let’s look at the intraday setup…

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Screen Shot 2014-05-13 at 11.32.52 AM

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ES 1892.50 is the IT range breakout line, and would be the first ST counter-trend sell if we were to get a move back below.  That line is also the squeeze line going into May expiration.  There is no resistance above in any time frame, though we do have some rising channel targets, the next closest being at the 1903 area.

The next closest primary trend line is at 1854.50 and that is the line that bears would need to cross to flip the first trend down.  Until that happens…the trend continues to be your friend.

Keep that weekly chart above in mind as we move forward.  Though there are plenty of smaller moves to play in the shorter time frames, the weekly bars are where the pros have been executing the black box trading algorithms that have been meticulously engineering the market higher since 2009 under the auspices of the ARRA and quantitative easing.  We’ll know when the game is finally over when we get the first break under the last higher weekly pivot that does not recover.  I assume also that we will have advance notice in the way of unanimous confirmed spotter signals and a wide confirmation of internal spotters in the Russell 3000 when that day comes.  Until that happens, the best plan is to continue riding the trend and pushing up the trailing stops.

…my .02

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ES Update

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Screen Shot 2014-05-07 at 9.42.08 AM

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The market has remained inside the anticipated 1844 to 1886 (a small poke above 1882.50) range for the past eight trading days.  That range-bound action has caused the short-term primary support line to move up to 1844, and has also allowed an intermediate range to form between 1725 and 1892.50

All trends remain up above 1844, and that is the line that bears would need to cross to regain control.

There is an open breakaway gap at 1839.50 just below the ST primary trend line.  Generally speaking, ES doesn’t typically leave those type of gaps unfilled and that could make a nice target to run the stops under 1844 and then fill the gap–but we’ll have to wait and see what the pros are up to with this sideways consolidation.

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Screen Shot 2014-05-07 at 9.46.27 AM

The short-term timeframe is in play here, but price is currently outside of the ideal entry zone (1844 to 1856).  The top spotter remains in play also, but would be invalidated on a move above 1892.50

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Screen Shot 2014-05-07 at 10.08.42 AM

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The hourly bar chart above shows the lay of the land for very short term traders.  The key line in play for both the VST and ST is primary trend support at 1844, with confirmed support just below at 1839.50.

The ST bullish trident (shown as light green in the charts above) has been working, with price meandering back and forth across the dashed centerline.  For trident traders–the momentum is negative below that centerline, but would revert to positive on a move back above.

…my .02

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