ES Update

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Ya gotta love those spotter signals…

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The top spotter generated April 27th was confirmed at the close yesterday–and this afternoon we got the gap fill target I was looking for at 2076.25

Next targets lower are the ST bull stops resting under 2064.50 and then the last upside breakout line at 2060.25 (from 4/6/15).  Under that line is a void of support down to the 2038 area.

This was a typical FOMC setup where they first whacked one side (in this case, the bears) by sweeping the stops pre-announcement and then reversing to head back down to attack the other side.

If the bounce from the gap fill at 2076.25 doesn’t stick, let’s see if they go after the stops under 2064.50 next–and if they do, then we have to be on the lookout for a possible stop sweep/reversal from that line.  Otherwise, they could continue on down to take out the IT stops under 2029 to fix the weekly chart paradigm anomaly that I have pointed out in previous posts.  If I were pulling the levers, that’s what I would do–but the pros might have other ideas.

This was a fun day to be on the short side.  Many strikes of SPY front month put options, for example, more than doubled–so it was a great spot to sell half to lock in profit and recover the original risk capital and set up free ride on the other half.  That’s a great way to establish stress-free ‘crash puts’, when the conditions are right, in my opinion.

We’ll see what happens on the late day bounce here from the gap fill.  It all depends on how many traders chased the short into the low.  If there are sufficient numbers of bears on board to make it worth their while then the pros will push it back up to run those stops–otherwise we might see another push down to the targets mentioned above.

…my .02

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FOMC Day

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Today at 2pm ET we get the latest Fed proclamation…

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The IT bear stops have already been run > 2110.25, so less of an incentive for the pros to go up than there would be if those were still intact, but it all depends on what sort of short bets were placed yesterday on the mid-day dip before the late day rally into the close.  If there are sufficient bears on board then they will go up and get those stops–if not, then the path of least resistance could be down.

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We have an unconfirmed top spotter signal in place from two days ago but there was a relatively lukewarm confirmation from the Russell 3000.  For that spotter signal to be confirmed, ES will need to close a daily bar under 2100.25 (shown as a dotted magenta line on the chart above).

There is support at the top of the old ST range at 2105.50 and that should be the first test of the day.  I have drawn in tentative channel resistance from the local high at 2119.75.  If price crosses above that descending trendline then the bears are likely in trouble–but if price stays below and support at 2105.50 fails then bears could have something going on the day.

The current ST bullish channel is shown as light green and that bottom trendline would be the first target should 2105.50 support fail.  Next targets lower are at the 2080 area and then an open gap at 2076.25

So, first order of business is support at 2105.50.  A break under that line would be a ST countertrend sell.

We already have an IT countertrend sell under 2110.25.  As I mentioned above, the pros have already run the stops above that line so if the intention is to go lower they probably won’t bother going back above–but if the plan is to break out and run higher then we should get that hint early on a hold of 2105.50 and then a push up and through 2110.25 and then through the descending channel top.

So, let’s call 2105.50 our bull/bear line for the day as we await the pro’s possible opening play after the long sideways consolidation.

…my .02

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ES Update

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Okay, here we go….

As expected, we have an upside breakout and the bears are being squeezed ahead of the FOMC announcement coming up on Wednesday (vertical line on daily/range chart above).

On the first screen capture above from Stops and Targets, we can see that we now have a trending breakout in all three timeframes.  The IT top spotter was invalidated, and we have a new higher ST primary trendline (now at 2064.50) for the first time in months.

ES is at new all-time highs so there is no upside resistance and there are currently no upside targets.  The key line to focus on now is ES 2110.25, which was the old IT range top.  If ES cannot break away from the old range and run higher bearish pros will sell the countertrend move under that line and stop their trade at the local high.

ST bullish pros will now move their trailing stops under 2064.50 –and that would be the initial target of a countertrend short play, should it develop.

The trending game here now is to push trailing stops up under successful long plays –and try to avoid giving back substantial gains should this breakout eventually fail.

There is absolutely no reason that any bear should remain short above 2110.25–but remember that a countertrend play sets up if we were to get a move back underneath on a close.  This is how the pros run stops and force buying (bears covering).  Let’s watch now and see what they do in conjunction with Wednesday’s FOMC announcement.

Now that we are into new highs, we start watching for unanimous top spotters again with confirmation inside the Russell 3000.  Pro A can trade back and forth with Pro B indefinitely to drive the price higher–but the game only becomes profitable for them when new money comes in from the outside to buy what they are selling at the price they are asking.  Take away the punchbowl and bad things can happen.  That’s why all eyes are on the Fed again to try to discern what they plan to do with their incessant funny money printing and with interest rates, either of which changing trajectory could pop this inflating balloon.

In spite of record new confiscatory taxes and accelerating Federal, state, and local revenue–the congressional/executive clown show in Washington has failed to reign in spending–and so the deficit continue to climb.  Sooner or later, that game is gonna have to end.

See…

http://www.usdebtclock.org

The old adage is; you get less of whatever you tax…and more of whatever you invest in.  So long as our government continues to accelerate taxes on productivity, we are most likely going to see less of that–and so long the same clueless dolts insist on throwing open the borders to admit burgeoning hordes of new potential Federal welfare beneficiaries and continue to embolden the current non-productive class to riot–guess what we are likely going to get much more of?

The Romans made the same mistakes…but those ignorant of history are, of course, doomed to repeat it.

 

…my .02

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ES Update

There is an interesting flurry of activity in the media surrounding a guy by the name of Navinder Singh Sarao, who is being held up as the sole cause of the infamous ‘Flash Crash’ on May 6, 2010.

This link to an article from Bloomberg is worth a read…

http://www.bloombergview.com/articles/2015-04-21/guy-trading-at-home-caused-the-flash-crash

This lone wolf day trader, who reportedly lives at home with his parents in a relatively modest flat in London, is being held out as the sole villain in this tightly orchestrated media barrage.

The media machine has it right that rampant futures manipulations have occurred, which influence trillions of dollars of assets–but isn’t it a bit curious that they ignore the giant elephant in the room, like how the ES has been made to do this since 2009, for example…

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Perhaps Mr Sarao is being held up as an example of what happens when outsiders try to muscle in on the action?

I have been asked many times over the years if I think that the market is rigged and I always reply the same.  I can’t prove that there is intervention–but the market certainly behaves as if there is.  That is why Stops and Targets works so well as a tool to find and anticipate upcoming pressure points.  Those are the places where supply/demand imbalances occur–and where better for the pros to go when they want to force as many traders as possible to the other side of their trades?

😉

</rant>

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This is now week six inside the 2110.25 to 2030.75 range from the top spotter move that stopped just short of breaking under the key 2029 threshold that would have enabled the technical minimum pullback to establish a higher low in the ongoing weekly sequence.  I thought that quite curious at the time, and I still do.

The pros have also stopped the white candles short of taking out the all-time highs > 2110.25, so the stops are being saved on both sides for a yet to be unveiled campaign, it seems.

The market paradigm defaults to ‘up’ until we get a shift caused by a break of the last higher weekly pivot low that does not reverse.  The pros passed on the opportunity to paint a higher weekly low under 2029 and so you can see the seven week accumulation of bull stops under that ledge.  Hmmm

If it were me pulling the levers; I think I would go up and take out the bear stops and see what kind of move higher I could get on a breakout.  If and when the buyers are finally exhausted–then those bull stops under 2029 sure might look tempting for an engineered swoon down to either another stop/sweep reversal–or perhaps even the long awaited wave 4 equivalent extended pullback to the major trendline supports.

The pros are setting up something big here, methinks.  I have said it many time before…first they bore you to tears and then when most least expect it…whammo!

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The daily bar/range chart above shows the now >30 trading day sideways consolidation inside of a contracting range.

The vertical line at April 29th shows the date of the next FOMC announcement.  It seems almost silly to expect anything but another torching of the bears in the general vicinity of that date.

The pros have a lot of time invested in this particular consolidation, so I would expect something fairly clever to occur when they are ready to finally make a trending move.  Lots of stops > 2110.25 and <2030.75, so let’s see how it all shakes out.

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Fine tuning a bit further, the hourly bar chart above shows the VST support and resistance for those who like to play in traffic inside of the range.  You can see how they popped the stops under 2075.75, as I speculated in my last post, and then gapped it up to trap the bears who sold that small break in the middle of the range.

The last few days have just been a squeeze and hold on those guys as we wait to see if that VST low at 2064.50 can morph into a new higher ST pivot in the next couple of days.

We haven’t had a new higher ST pivot form above the primary trend line at 2034 since 12/1/14…so it has been a very long time without a trending move higher!

Stay attentive from here on as we watch for the next act of the show to open.  Something about this Navinder Singh Sarao thing strikes me as being orchestrated.  The pros like to capitalize on diversions in the news to mask intent (in my opinion), so perhaps this is intended to come off as a reassuring gesture to relax the fear of another significant pullback as the market has remained stalled?

To me, this market really needs a correction to eventually bring new money into the market.  The pros can move the market wherever they please but they need to entice outsiders with real money to take the other side of their trades to cash out.  Pro A can trade shares back and forth with Pro B as much as they want to move the price–but until they can entice a sucker to come along and buy what they are selling at the price they ask, then it is just a paper profit.

Supply and demand, coupled with pressure built upon fear and greed is what has always driven the market.  You can see clearly on the charts above where the pressure points exist (>2110.25 and < 2030.75).  Buyers above and sellers below.

As I mentioned above, if it were me pulling the levers I think I would drive it into the guaranteed buyers above to sell out all I could.  If the breakout proves unsustainable with real cash from outside investors–then I would sell as much short as I could and then drive it back down under 2030.75 and then cover into the panic selling underneath that level (and perhaps lower).

Pros could decide to go the other way also by driving it down first and then executing yet another of the signature stop sweep reversal paradigms we have seen since 2009 before heading back up again to new higher highs.  And, of course, it could just pop out and keep going on yet another breakout run higher in what is already a surreal trajectory.  Either way, this next big move should be interesting…

…my .02

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ES Update

Today is the third Friday of the month, so it’s options expiration day for April derivatives….

It shouldn’t be too surprising that price is currently being pinned near the middle of the IT range between 2030.75 and 2110.25.  That strategy insures that the maximum number of option buyers get screwed today–and the pros are very good at that..

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Range midpoint formula:  (2110.25 + 2030.75) / 2 = 2070.50

…so that’s the likely general target area (daily low is 2071.25, as I type).

Feels pretty bearish today, of course, but in the overall scheme of things we are still stuck in the same contracting IT trading range that has been forming since the 2/25/15 to 3/12/15 high/low move.

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Stops are still congregated just above (for bears) and just below (bulls) that IT range as we wait for an eventual trending move to develop.  The pros tickled the bear’s trailing stops just above the descending trendline but stopped short of driving to the major breakout above–so those upside stops are obviously being saved for later.

There are also a huge number of bull stops just under 2029 area–but to break into those could open up an avalanche of selling into a sizable void underneath.  Paradigm since 2009 suggests bulls have the edge until we finally get an IT break that doesn’t immediately recover.

For now, we are just revisiting the halfway point of a range that is now nearly 40 trading days old.  Today the pros have run close-in VST stops under 2075.75.  The next target lower would be a retest of the original trendline breakout I pointed out at 2060.25.

See how the pros just ran from that trendline breakout to the stops above the next higher trendline?  They have been picking on bears recently, so that is where the pressure has been–but bulls trading inside the IT range got the first taste of a shakedown today on the minor OpEx shenanigans and stop sweep under 2075.75.

Let’s watch and see if they go for 2060.25 next–or if they stop and reverse around 2075.75 into the close.  The VST bears are largely shut out of the down move here, so they might keep pushing lower…but keep the midpoint number of 2070.50 in mind.

The next pin targets, which are the expiring single stock derivatives, will come at the close today.

…my .02

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