ES Update

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Let’s start from the higher timeframes and then zoom in…

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Screen Shot 2014-07-31 at 8.36.57 AM

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The key number to remember from the monthly bar chart above is last month’s close at 1952.50.  A move underneath that line starts to paint a dark candle on the chart–and there are a number of black box trading programs that look for that configuration as a sell.  The pros know that and have been triggering those sellers as a distribution/accumulation zone over the past 16 trading days.

Lots of bears are licking their chops at the next major pullback from this very obvious extension from support–but when major tops actually come, there usually aren’t lots of retail bears in position to take advantage…so keep that in mind.  Usually, we have to see a complete capitulation before a large break–and I don’t think we have that yet, but we’ll have to see see how support holds up.

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Screen Shot 2014-07-31 at 8.47.25 AM

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The weekly bar chart above is a road map for the pro’s manipulation strategy since they got their boy in office in 2009 and the ARRA was initiated.  I have explained this one in detail many times in previous posts–but for now, the number to keep in mind is the last higher low (marked on the chart by green dots).  Until/unless we get a break of a last higher low on this chart the paradigm remains unchanged.

The last higher low was built at 1796 and we were way extended from that level at 1985.75.  I have been preaching to the choir here about an expected pullback to minimum support to give the pros a chance to build a higher low in the sequence.  That minimum pullback level for the current pullback is at 1942 and we are almost there.  Once that level is broken and the pros have their minimum, discerning bears should start to be very cautious and trail tighter stops.  ES 1942 is the minimum, then 1936.25 is the next target lower (see hourly chart below), followed by rising intermediate trendline support, which is currently at the 1925 level.

The takeaway here is that until/unless 1796 is taken out (or the next higher low that is built in the sequence)–the predominant intermediate paradigm remains intact.

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Screen Shot 2014-07-31 at 9.00.46 AM

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The hourly trend chart above shows ES closing in on the ST support trendline here, and also the significance of 1942.50 as a trigger for selling by bears.  Remember, the pros only need to tag 1942 to achieve their minimum pullback goal–so keep a sharp eye on 1942.50 as a bull/bear line if we get a stop sweep underneath and then a reversal after the bears go all in, which is exactly what I would do if I were pulling the levers for the pros.

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Screen Shot 2014-07-31 at 9.07.10 AM

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Screen Shot 2014-07-31 at 9.04.33 AM

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The S&T ST tab and hourly bar chart above pulls it all together…

We see where the countertrend sell came in at 1978.25, and we also see that price has achieved the Stops and Targets first target at the ideal entry zone between  1947.50 and 1955.  I think we might get a dip lower to 1942 minimum, but Stops and Target’s bull/bear line at 1945.25 is very close to mine at 1942.50

As pointed out above, the next targets underneath the ideal buy zone (to cover short partials) are at 1942, 1936.25 and then 1925

Well done bears from the counter-trend sell signal at 1978.25…now be sure to hold on to your wallets, because if the pros get sufficient bears to sell a break, we could potentially see a serious snap-back rally as those easy markers are harvested.

It is all about 1942 here…

…my .02

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ES Update

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Screen Shot 2014-07-28 at 9.38.27 AM

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On Wednesday we get the newest FOMC proclamation at 2 PM ET

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Screen Shot 2014-07-28 at 9.51.26 AM

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The pros have parked the market in a slightly expanded range between 1942.50 and 1985.75 after having run the stops on both sides of the previous range between 1945.25 and 1978.25

As I mentioned previously, running the stops on both sides of a range is the most ruthless move the pros can make, so get ready for the next shock and awe move…

We got the expected counter-trend sell at 1978.25 after the stop sweep/reversal setup that I pointed out in my last post, and so now we are waiting to see where that goes to the downside.

I pointed out two preliminary VST trend channels recently and the pros banged along the top rail of the bearish channel for a bit before the breakout that led to the topside stop run.  As I type, we are seeing a dip to test the bottom rail of the bullish channel, currently at 1963.75, which was the first downside target of the countertrend sell on the hourly bars.

When you have a channel inside a range, the range often wins–so let’s use 1963.75 right here as an intraday bull/bear line.

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Screen Shot 2014-07-28 at 10.17.09 AM

Stops and Targets is looking for a pullback to 1955 area as the next ST target lower.

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Screen Shot 2014-07-28 at 10.04.58 AM

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We have a new weekly bar forming and so we also have a new minimum pullback target to set a higher low in the sequence.  That minimum pullback number is now set at 1942.25 for FOMC week.  If we get a sustained run lower after  break of the trend channel bottom rail, that would be the downside target.

It’s all about the FOMC announcement this week, so let’s see how the pros manipulate the market ahead of the pronouncement and proclamation on Wednesday.

All trends are up > 1942.50, but we are in a counter-trend sell pullback currently.  As I mentioned above; 1963.75 should work as the bull/bear line intraday, as we watch the setup going into the FOMC on Wednesday

…my .02

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ES Update

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Screen Shot 2014-07-22 at 9.51.03 AM

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The tentative bear channel I pointed out in my last post hung in there for a few days–but was broken in the overnight session.  The next target higher is the fourteen days of accumulated bear stops sitting just above 1978.25

The VST range has extended to 1942.50 on the downside and that level would need to be held for the next few days to eventually morph into a ST lower low.

As I pointed out in my last post, the minimum pullback target to reset the weekly chart to a new higher low is at 1936.  If it were me pulling levers, I would take those stops above 1978.25 and then yank the rug…but we’ll see how it goes.  They already popped the close-in bull stops under 1945.25, and the most ruthless play by the pros is always a double stop run on both sides of a range.

If they take out 1978.25 to the upside, that line will become the intraday bull/bear line as we would then be watching for a potential stop sweep/reversal play to develop after the buying subsides from bears covering.  The max upside target if we get a sustained upside breakout would likely be the rising upper rail of the tentative ST bullish channel, which is currently at the 1991 area.

It is still range-bound here between 1942.50 and 1978.25, however, as the pros continue to position themselves for the next trending move.

Technically, we have a bearish lower high/lower low sequence building by the almost laughably minimum of margins.  The VST black box trading programs see that and have predictably positioned themselves accordingly.  A pop above 1978.25 would negate that sequence, however, and start the short-covering–so no matter how you slice it in the very short-term, ES 1978.25 is the line currently in play and we’ll be watching carefully from here to see what comes next.

All trends remain up > 1945.25…but as crazy as it sounds, ES 1936 could be beckoning if we were to get a stop sweep reversal at 1978.25–otherwise, 1991 is the next target higher.

…my .02

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ES Update

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Screen Shot 2014-07-18 at 10.28.50 AM

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Not much has changed yet in the big picture:

Looking at the monthly bar chart above, pretty much anyone with multiple neurons firing can see that the steep trajectory of the advance is likely unsustainable–and so the bears are licking their chops for at least a tradable pullback…and the pros know it.

From a long-term perspective, the first monthly bar counter-trend sell signal signal comes on a black candle body–and that happens when price dips below the last monthly bar closing price at 1952.50.  That has happened twice so far in the current month, and we saw the bears come alive only to be run over on a move back above that line when trend followers bought the dip.  From a monthly bar perspective, which is where the big block trades happen, nothing really significant changes until/unless a previous monthly bar low is taken out.  That has only happened three times in the past 21 months and all of those dips were reversed.  This current impressive run was started when the bearish trendline resistance was broken in September of 2012.  As I pointed out at the time, that was the first very important signal that the secular bear was dead.  That said, this current rocket shot is starting to get a little silly, and we all know that sooner or later this market needs a breather.  The major monthly bar targets lower are support at 1658 and then the breakout support at 1481.75.  Those are way down there, so bears are understandably excited–but bears aren’t typically the most patient bunch and so long as we keep seeing guys going all in guessing at tops before confirmation, this market will keep inching up and running those stops.  It is just too easy for the pros to take back those loaned shares from the bears at guaranteed higher prices.  As I have been saying, I think we are going to need to see a true bearish capitulation before we get that first break of the paradigm that does not get bought.  In a perfect world, we will get huge numbers of top spotters before the breakdown occurs–but we’ll see how it goes and the next chart is the true paradigm road map…

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Screen Shot 2014-07-18 at 10.48.42 AM

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The chart above shows the unmistakable pattern they have been using to ratchet the market higher since 2009.  That bullish paradigm won’t change until/unless we see a higher low that is taken out and then held.  On weekly bars the market is clearly extended at present.  The last higher low was way back at 1796 and that suggests to me that the next pullback is most likely going to be to set another higher low.  As I type, the minimum pullback to accomplish that higher low would be to just under 1919, and barring something extraordinary today to the downside, that’s not likely to happen.  However, with the opening of next week’s bar–that minimum pullback target will change to 1936 and that is much more reachable, should they decide to yank the rug sometime next week.  To me it looks like they have been baiting the bears by dipping twice below the previous bar lows and then jacking it back up near the local high at 1978.25.  Just above that line is where the bear stops are sitting for three week’s worth of top pickers, so keep that in mind.

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Screen Shot 2014-07-18 at 11.01.18 AM

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The daily bar range chart above does a very good job of showing how the pros have been toying with the range built between 1945.25 and 1978.25, which consists of two pokes below the last monthly bar close of 1952.50 that I pointed out in the first paragraph above.  Those two pokes got the top-picking bears excited and then immediately they were reversed and trapped.  This market won’t fall until those guys give up, and so that is why I mentioned in a previous post that it can takes weeks of patience sometimes to get the proper conditions in place for a tradable pullback in a strongly trending market.

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Screen Shot 2014-07-18 at 11.09.09 AM

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The hourly bar chart above fine tunes the current trading setup…

I have drawn in two preliminary trident channels to watch inside the range.  The red channel shows where we would expect any rally to stop if the idea is to set a lower ST high at 1978.25 and then extend the current shallow push lower, underneath the now broken ST support at 1945.25

The green trident shows where we would expect intraday buyers to come in if the idea is to set a higher ST low at 1942.50.  Remember that current low is not deep enough to satisfy the weekly bar minimum pullback paradigm, so if it breaks to the downside we could see a move under 1936.25 and possibly down to the bottom of the red channel.  The ST low has already been broken, so unless they are planning to take out the bear stops above 1978.25 and then drop back down, support has been weakened here.  If I were in charge I would take out the high and then possibly head down next week to set the next higher weekly low–but that’s just a guess here, and if we get a touch of that top rail of the red trident followed by selling–then we could see a run lower while preserving those bear stops above 1978.25 for a later date.

Intraday is pretty easy.  The bulls have their stops set at 1942.50 and the most sophisticated traders are likely looking for a run to the red trident top rail at about 1972 as a first target.  If we were to get a break under 1942.50, we could see black box sell programs light off on as close-in bull stops are run.  Otherwise, 1942.50 is the bull/bear line today and traders are looking for partials at 1972 area and then the stops above 1978.25 if the trident rail fails to stop the rally. The pros don’t like bears much in bull markets–so however this coming larger pullback eventually plays out, I expect the pros to fabricate a strategy that excludes the maximum number of bears from the action when the real decline begins.

Let’s keep an eye on 1936-1906 area during the coming week to see if the pros try for another higher low to reset the weekly bar paradigm.  A pop to take out the local high and then a reversal with lots of spotters would be ideal–but that might be a little too obvious here–so let’s see what happens first at that tentative top rail around 1972

…my .02

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ES Update

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As I mentioned in my last post; 1) we were obviously way overdue for at least a correction, and 2) it would probably come at a time when most countertrend bears would be unlikely to benefit from it.

Overnight, the ES futures were taken down >20 points on no apparent news–and so here were are with permabears excitedly cheering for carnage, even though most likely had no positions on ahead of the takedown.

So, let’s take a quick peek at the big picture here starting from the higher timeframes and then move in…

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Screen Shot 2014-07-10 at 9.43.43 AM

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Starting with the monthly bars, with a move under last month’s close at 1952.50 we now have a black candle body which is mildly bearish (countertrend)–but it would take a move under last month’s low at 1906.50 to kick off any large-scale sell programs tied to this time frame.

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Screen Shot 2014-07-10 at 10.28.05 AM

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Moving in to the weekly bar chart, which is the ‘road map’ for the current paradigm that has been in place since 2009…

Last week’s low of 1948 has been pierced, which means the close-in stops are being run here in the weekly timeframe.  That line at 1948 now becomes the stop sweep/reversal line and professional countertrend bears in profit will likely set partial profit stops just above–which means we should see a source of buyers just above that line.  Those buyers would be a combination of bears covering and bulls buying to join the trend at a test of weekly support.  So, basically, we are VST bearish under 1948, but would reverse to bullish on a move back above.

It would take a move under 1917.50 from here to potentially build another higher low in the sequence.  ES is very extended from the last higher low of 1796, which is what I have been pointing out in recent posts.  It would seem reasonable for the pros to build a higher low at some point–and so that would most likely be the minimum target of the current pullback–if we don’t get a stops sweep/reversal here at 1948

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Screen Shot 2014-07-10 at 10.00.39 AM

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Moving in to the daily bar range chart…

ES has been pulled back to break trendline support and a reversal at 1948 would easily accommodate a new ST higher low.  So, using the weekly stop sweep/reversal line at 1948 as an intraday bull/bear line should be a reasonable VST trading strategy here.

Note that current ST primary trendline support is at 1936.25.  Until or unless that support is broken and held, this is just a garden variety pullback in a trending market.

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Screen Shot 2014-07-10 at 10.08.14 AM

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Fine-tuning things using the hourly bars…

We see that ST confirmed support at 1947.50 is generating a bounce here as the buyers mentioned previously > 1948 are being engaged.

The smart thing today is to use 1947.50/1948 as the intraday bull/bear line.  Congrats to those counter-trend bears who caught this downdraft–but it is best to be very careful above 1948.

If the current stop sweep/reversal setup fails at 1948, the next target lower is the ST stops under 1936.25.  That is the next stop sweep/reversal target and the place where nearly every day trader will place their trailing stop for long positions initiated here near the open.

You guys who have been reading my posts for a long time know that I enjoy a good bearish beat-down as much as the next guy, but without unanimous top spotters in place and support at last higher lows remaining unbroken–I expect that this current pullback will ultimately turn out to be corrective in nature.  If ES were to break and hold under ST primary trend support, then I might start warming up to the idea of a deeper pullback–but for now it is all about 1948, and we’ll take it from there once we see how this (not so) sneak attack on the futures resolves.

…my .02

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