ES Update

Let’s take a look at the macro picture here starting from the monthly bars and then zooming in to faster timeframes…

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Starting with the monthly bars, what stands out is the steep angle of the advance since the VLT breakout in September of 2012.  That breakout occurred when the descending red trendline was broken to the upside.  My commentary at the time pointed out that was a very big deal indeed!

That was the first sign of the impending official death of the secular bear market that existed from 2000 to 2009.  Once the last major lower high from October of 2007 was exceeded in February of 2013 the rout was on–and the market hasn’t looked back since.

If you click on the chart above to enlarge the image and look carefully you will see two light green rectangles that pivot on the key trendline breakout point.  The second rectangle on the upper right is an exact clone of the first in both time and magnitude and creates a rule of thumb upside target of 2167.25 on March of 2016.  In other words, if we take the time and angle of the move from the bear market low of 523.25 to the trendline breakout at 1345.25 it gives us a projection of time and price for the second leg after the breakout.  I recently refined that projection to make it more accurate from the small cross that some of you noticed on older charts.  I created that initial projection way back at the trendline breakout in September of 2012 and as you can see–not too shabby of a guess, thus far, on time, price, and magnitude.

We are possibly nearing the end of that huge breakout run–though there is still price and plenty of time remaining from the projection.  A tradable top is coming, that much we all can agree upon, but the trick is going to be staying with this amazing trend until it finally rolls over.  And, once it does, it must be emphasized that the old secular bear is dead and gone.  The bears would be playing for a deep pullback–and the most obvious target in this timeframe would be a move back down to VLT trendline support, which is currently about 400 ES points lower.  So, that’s a pretty significant carrot and quite enticing to professional bears.

It is also quite obvious to the bear’s natural enemy–which are the market pros and trading algorithms programmed to take every last cent of profit out of the upside momentum before switching sides and then running the market lower for a bit to target bull stops and to seek an environment where they can double up buying to cover short trades and then reacquire equities at bargain prices ahead of a reversal.  The trick for the pros is to eventually create a buying opportunity without turning the market against their positions.  To do so requires creating significant panic and fear–something this market hasn’t seen in a good long time.

I have marked the key paradigm support line at 1954, which I will explain on the weekly chart in the next section.  Until/unless that level is exceeded to the downside–this great bull move continues to chug along unabated.  For those of you who are familiar with Elliot Wave analysis–what we are watching for in the future could be the equivalent of a 4th wave.  It could scare the heck out of most everyone, if it goes as I think it might, but barring something extraordinary it would just be a massive reset of the new secular bull and a buying opportunity for those who know how to read the signs.

So many people get emotionally tied up in the often counter-intuitive machinations of the market–but there is definitely a method to the madness and what I hope to illustrate with the chart above is that this bull market is the result of a release in pent up demand from the crushing bear market of 2000-2009.  Technically, it is doing exactly what it should be doing.

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Moving in one order of magnitude to the weekly bars…

This is a perfect ‘road map’ for what the pros have been doing since the ARRA was passed at the start of the Obama administration in 2009.  We can see a clear paradigm that has developed whereby the pros have generated a series of four bar monthly pivots (marked by the small green and red dots on the chart above).

A bullish trend may be defined as ‘a series of higher highs and higher lows’ and that is definitely what we see here…

What we are most interested in watching are the green pivot lows.  Only five times since 2009 (all highlighted by shaded ovals and numbered on the chart above) have we seen a lower low form in the sequence.  In every instance, except for the one marked by a yellow oval, the pullback was a stop sweep followed by a reversal.  These have been the key buy points in the trend and I have been pointing them out as we have been going along.

The yellow oval was roughly akin to a wave two pullback for Elliot enthusiasts (I am not, but it serves to illustrate the point here).  The breakout run (where we are currently) is the wave three analog, and what we are awaiting at some point is the wave four correction that will likely fool and confuse many.

We will know when the current paradigm has changed when we get a pullback below the last pivot low that does not recover!

The last higher pivot low was formed last December at 1954 and so that is currently our official paradigm support–but the pros did something very curious at the last pullback to 2030.75.  They stopped the decline just short of the minimum that would have been required (2028.75) to potentially form a higher pivot low in the sequence.  They then defended the 2030.75 level vigorously in the ensuing weeks to form a multi-week trove of stops nested just under that level.  Perhaps that is significant, and perhaps not–but it struck me as very odd for them to do that and I suppose in time we will find out if that ledge was created as a target for a future decline–or if it just served as a decoy to distract.  I have marked the 2030.75 level on the chart above just as a reminder to myself to keep a watch out if we get there on a coming pullback.  That is also the level picked out by Stops and Targets for the intermediate primary trend line.

For those interested, the minimum pullback level to form a higher 4-bar pivot from the current configuration is just below 2056.75.  ES 2057 is the Stops and Targets short-term range bottom–so S&T is already locked on in case we were to get a decline from this area.

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I have posted a screen capture of the summary tab from Stops and Targets above to show the current trending configuration for ES.  Take note of the trading range bottoms.  They are the same key support numbers I am pointing out above in my charts.

It is also worth noting that we have another confirmed spotter signal in play along with countertrend sells in the intermediate and short-term timeframes at 2119.75 and 2110.25 respectively (see last signals on the image above).

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The S&T short-term timeframe is in play–and the next lower countertrend target is the top of the ideal buy zone at 2091 for intermediate support at 2081.25.

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Zooming in closer to the daily bar/range chart we can see where the countertrend sells came in (VST at 2115) and also a rising short-term trend channel whose bottom support rail is currently near 2091 area (same as the S&T target above).  That should be the next target lower in the current push.  If that ST bullish channel breaks down, then we might have something going to the downside–otherwise, it could be just a garden variety pullback with ST higher low minimums already met.

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…and finally, we take a peek at the hourly bars to zero in on the current setup.  We can see the countertrend sells and the rising ST bullish channel bottom rail (drawn in light green).  Let’s watch and see what happens if/when ES gets to that rising light green trendline at/near 2091 (which is also the short trade partials target for the current CT sell signal).

Bears are in business below 2119.75 on the countertrend trade with a confirmed top spotter.  First test is the channel bottom and if that were to fail, next stops lower are just under 2079.25–followed by the rising ST trendline currently at the 2068 area.

…my .02

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ES Update

This has been a great trading market since we got the last top spotter signal at 2119.75 on 4/27…

 

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This is now the 14th trading day since the spotter signal and what really pops out to me on the chart above is how the last IT pivot high at 2110.25 has absolutely controlled the upside of the trading range since.  Thus far, that line has tuned back every rally since we got the stop sweep and reversal (and bearish capitulation) forming the spotter top.

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We can see the action much more clearly by zooming in to the hourly bars…

The dark red dashed line at 2110.25 shows four thrusts up to rejection at/near that line since the top spotter high.

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Guess where we are again, as I type?

I have placed numbers at the key analysis points that I have pointed out in recent posts:

1) The top spotter signal formed after the last bear stops were run above the old IT pivot high at 2110.25

2) The first countertrend sell signal (IT) under that line.

3) The gap fill that I pointed out at 2076.25 (also coinciding with a stop run under the broken IT trendline support)

4) A touch of the initial spotter channel top rail and then CT sell signals at 2010.25 (IT) and 2105.50 (ST)

5) A perfect touch at the hidden support line at 2060.25 I pointed out, where the last major bear to bull breakout started on 4/6/15

6) Another touch of the IT pivot line at 2010.25

7) A perfect bounce off IT confirmed support at 2081.25

8) …and now here we are

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It is worth noting that Stops and Targets confirmed both of the bounce points that I pointed out on my charts above…

S&T generated a ST buy at 2064.50 and an IT buy at 2081.25 –so really, it has been nearly flawless analysis and the pros have been right on script as we head into May options expiration tomorrow.

The resting bear stops are just above the current area at 2113.50, 2115, and then finally–just above 2119.75

I posted before that the perfect technical setup would be to run the stops above 2115 but to stop short of running those above 2119.75.  That seems unlikely, since they are so close together–but let’s see how the pros handle this right here.  If the pros are planning to surprise everyone and head back down, it would make sense that they would want to protect their own stops, which would be resting above 2119.75…so keep that in mind.  If they take out 2119.75 and keep going then it’s just more of the same futures-intervention tactics that we have seen constantly since 2009.

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Max Pain for May SPY options is currently at 210 for tomorrow’s close and SPY is presently trading at 211.75, so this could get interesting.

So, as before ‘head’s up’ again right here near ES 2110.25 area.

…my .02

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ES Update

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Okay, we got the bounce timed perfectly from my last post at the hidden support level of 2060.25 (see the shaded green oval on the hourly chart above).  Actual local low came in at 2057 …so not too shabby on the call.

This morning we got the employment propaganda report from the BLS in the premarket, which almost everyone knows is a complete joke from a statistically-meaningful perspective–but it serves it’s function well as cover for the pros to do their thing.

Predictably, we got the stop sweep / reversal play around the old ST range bottom at 2064.50…

Now that the stops have been run under 2064.50 we have the very predictable futures-led squeeze back to bearish trendline resistance, which is shown as a dark red descending trendline on the charts above.  That’s where price is hovering, as I type.

If the pros punch up and through that line–the next targets higher would be stops located above VST resistance at 2115 and then above the all time high and spotter signal at 2119.75

Sometimes they like to feign a pullback from resistance to suck in new bears and then ultimately push back up and through to squeeze those players–but that push down to 2057 guaranteed a new lower low in the ST sequence–and what logically follows a lower low…is a lower high, unless we get an outside double stop run, which is very possible.

To set a new lower ST high from the present configuration we would need a pop over 2115 that then stays under 2119.75–but what’s the point of taking out 2115 and not going just a bit higher to get the stops > 2119.75?

The line in play right here is the bearish channel top trendline at the 2111 area.  If it is going to turn back down, even if just for a feint, this is the spot–otherwise new highs are likely.

…my .02

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ES Update

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Taking a peek at ES here intraday…

So far, the pros have been banging around inside the ranges.  They knocked out the bears near the range top and now here we are fishing around near VST and ST support at 2070.25 and 2064.50 respectively.  Under those two lines are where the bull stops are resting.  Those would be the first big prizes for the engineered push lower from the spotter high and last CT sell signal.

There are five day’s worth of accumulated VST bull stops under 2070.25 and 21 days worth of stops resting under 2064.50!

When you are short, as the pros undoubtedly are, there is simply no better target than a fat trove of bull stops to create a selling panic large enough to cover into without running the market back against you own position.

Underneath 2064.50 is a hidden support line at 2060.25, which is where we got the last upside breakout from a previous downtrend on 4/6/15.  That could be a bounce point after a stop run, if it comes.  There is a support void under that line down to 2038

Those of you who have been reading here for a long time know how these things typically go…

Be on the lookout for a stop sweep/reversal play once those stops are run–but they might just keep going if enough bears are shut out of the trade.  If the trap door under 2064.50 opens, there is nothing but air down to 2038–if 2060.25 doesn’t stop it.

Head’s up right here…

…my .02

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ES Update

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In my last post I pointed out that the gap fill target was hit at 2076.25 and that the number of traders who chased late short trades on the last leg down would determine whether the pros pushed back up to run those stops.  Clearly, there were plenty who jumped on short…

The chart above shows that after the gap fill the pros went up to run the stops above three successive descending trend lines.  The last pop to a local high at 2115 was just above the main bearish channel drawn from the last spotter high.

If the planned intent is to reverse after the squeeze and go lower, there should be no reason to revisit that area above the last local high at 2115 and the next targets lower are in the 2079 – 2081 area.  If we were to get a sharp rally that breaks out above–the next target higher would be the last bear stops sitting just above 2119.75.

I have said that if I were pulling the levers I would take this market down for at least a reset–but the pros won’t do that until every last potential buyer has been wrung out–and excessive numbers of bears represent guaranteed buyers at higher prices.

ES 2110.25 should be the bull/bear line today as we watch to see whether the pros take it back down again and potentially fill a daily bar gap down at 2079–or if instead they decide to go after the upside range breakout > 2119.75

…my .02

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