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In my last post I pointed out the weekly downside target at 2007.50 and guess what? Yep, the pros flushed just under that key line after the Paris terror attack and then launched a powerful reversal yesterday to swamp any bears who initiated a short trade last Friday. Yesterday’s daily bar was an ‘outside bar’–meaning that it took out both the daily low AND the daily high on Friday. That’s a bullish engulfing bar and is the surest way there is to kill off bears. Perhaps that was done by design to deny any bad guys a profitable trade who had foreknowledge of the attacks–or, the more cynical among us might perhaps proffer an opposite thesis.
As I type, ES is back to the bottom of the old VST range where the pre-Paris VST trendline break began. This is confirmed resistance here meaning if the squeeze rally is going to stall it could come in this general area. Otherwise, the primary trends are back up above 2025 and the pros are behind an upside push.
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So, you might be asking yourself…what made ES 2007.50 significant as a target in my previous analysis? Take a look at the weekly bar ‘roadmap’ chart above that I have been constantly referencing since the ARRA fix was put in at the bottom in 2009. The pros have been using four-bar pivots to construct the major moves. Count back four weekly bars from the current one and 2007.50 was that bar’s low–and so that was the minimum pullback needed to potentially continue the paradigm to build higher lows. We got a slight overshoot to 1998.50 so that triggered the stops and created panic sellers, which of course the pros promptly relieved of their securities to first cover their own short position and then to reverse long into a squeeze to exploit the situation in Paris. Double buying from the pros coupled with forced short-covering from bears equals lots of buying –and that’s what causes these sort of explosive rallies.
So, if the Paris Terror low at 1998.50 were to hold going forward–we could potentially have yet another higher pivot low form at that low. Remember, the pros have been launching rallies off all but one four-bar pivot breach since 2009 with the most current one having been in August at point #6 on the chart above. Once those rallies begin, they simply build the stair steps higher until we eventually get exhaustion followed by an eventual breach of a higher low and then the cycle repeats. We have their road map–and as I have said many times before the paradigm will only officially change when the pros break a higher pivot low and then do NOT recover past that pivot. We got the last downside higher pivot low break at 2025 and now price is once again back above that key line (which is also the Stops and Targets IT primary trend line). As I explained in my previous post, the paradigm can only change from the current level if the last higher pivot (currently at 1861) were to be breached. In the meantime, we will be watching to see if 1998.50 might potentially become yet another higher pivot low–but only if that provisional low can hold over the coming month.
So, in essence, the effect of the French terror attack has so far been nullified so long as ES remains above 2025 –and we are again right back to wondering if a rally can possibly poke through confirmed resistance right here at the 2062 area–or if we will see another pullback from near here to retest the terror low.
Let’s see what happens right here at 2062 (old VST support = new resistance) to 2065 (VST trendline break price) area. Some very aggressive bears may take a shot here with very tight stops–but if price clears this resistance area to the upside there is nothing to stop the rally from potentially heading to the ST stop area above 2110.25
The thinking goes that if the pros wanted to take this market down–they had the perfect excuse to do so from the news of the terror attack. Instead, the pros have guided the futures back the other way. Now, right here near the 2062 area…it’s time for them to show their hand again, so head’s up!
…my .02
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