ES Update

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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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Let’s take a ‘Big Picture’ look at the broad market using ES as a guide…

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Starting with the monthly bars, look at the two rectangles on the chart above.  The lower rectangle is formed by setting the bottom left edge at the bear market low in March of 2009.  The upper right side of the lower rectangle is set at the precise point where the bear market technically ended on a breakout of the red descending trendline.  That rectangle plots both the time and price vectors of the rally from the low to the breakout.  I cloned that rectangle and set the lower edge of the top rectangle to line up exactly with the breakout price (1328.25 in September of 2012).  The cloned rectangle became a time and price projection for the explosive breakout rally which has taken us now very near the upper right edge projection of 2150.25 in March of 2016.  At the time of that breakout some of you may remember my post posting out that was a very big deal and that the bear market was officially over.  Well, here we are several years later and now about 100 points and 4 months from the projection–and you have to admit, that’s been pretty darned accurate thus far.

On the monthly bar chart above you can see how close we are now to the projected time and price objective.  If the next few months go as expected you can also see why I still favor one more high before a larger pullback begins–but in reality, some very savvy traders may be concluding that close enough is close enough as we start to sense the waning momentum as money leaves the market.

All things (both good and bad) eventually come to an end and so too will the current leg of this amazing rally.  Before it rolls over, however, I think the folks pulling the levers are going to make it as difficult as they possibly can for bears to catch a ride at the start of a takedown.  That should be evident from what happened at the start of the last double top takedown where virtually no bears were aboard when the shock and awe move commenced.  The late to the party bears who chased the fast move into the hole and then missed the turn were abused by that long white October candle.  All that remains to finish off those bears is a move above the double top (May and July) at 2117.  From a monthly bar perspective the closest bull stop level is below the October low at 1883.  That’s a long way down from here.  Not saying that it can’t or won’t happen but 2117 is a lot closer target at present than 1883.

 

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Moving in to the weekly chart…

The weekly chart has served as an ideal roadmap to show how and what the pros have been doing to engineer the market higher.  If you look closely at the chart above I have placed small dots at the 4-bar pivot lows and highs.  I have highlighted the six times since the bear market bottom in 2009 where we have seen a lower low.  In five out of six occurrences (the exception being point #2) that lower low was a perfect entry for rejoining the rally.  It happened again at #6 in August and I pointed that out here in real-time.

In order to have another breach of the last pivot low would require a move below 1861 in the weekly timeframe.  In order to build a new higher pivot low (with a commensurate lower pivot high at 2110.25) from here would require a minimum move down to 1982.25

For now, the key line in play on the weekly bars is the same one I pointed out in my last post at 2064.25.  That number is the low of last week’s bar, under which the close-in bull stops were resting.  That is still a good bull/bear line from this timeframe perspective as we watch to see if today is a double dip into those stops or if we will get an extension lower perhaps to set a higher pivot low as described in the paragraph above.  From a weekly bar perspective, 2064.25 remains the line in play in what is currently a bearish weekly bar (showing a lower high and lower low from the previous week and a last price below last week’s low).  Next targets lower would be 2051.25 and then 2007.50 (10/23 weekly bar low) if we don’t get a recovery back above 2064.25.

 

 

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Moving in to the daily bars/range chart…

We got a slightly lower low at 2062 on the VST range after the last bounce from a stop sweep under 2064.25 (from the weekly bars).  As I type, the bull stops under that VST low are being run.

On the chart above, one can see that the short-term range (shown as a bright yellow highlight rectangle) is extremely wide at present–owing to the aggressive short squeeze from the last short-term low at 1861.  The pros took no bearish prisoners on that squeeze, which meant no tradable pullbacks.  That squeeze hit the breakaway gap fill target I pointed out at 2105.25 and the pros have been in profit-taking mode since.

The two defining points on the above chart at present are the VST low at 2062 (which lines up well with 2064.25 from the higher timeframe) and the bottom of the rising short-term bullish trident channel (shown in blue) which is currently near the 2032 area. If it is to be a stop sweep/reversal then the bears will begin to lose leverage on a cross back above 2062–otherwise, the next lower daily bar target is the bottom rail of the trident channel.

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Moving in to the hourly bars…

You can see the two red confirmed resistance lines at 2062 and 2064.25.  Bears are in control under those lines.  Next targets lower are the stops under 2051.25 and then the bottom rail of the rising trident channel.  Stops and Targets’ intermediate-term primary trend support is at 2025.

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And finally, correlating with Stops and Targets…

ES is currently in a ‘Bull 9’ configuration, which means that we are awaiting a higher short-term pivot low to form above the current IT primary trendline at 2025 to return ES to a fully-bullish ‘Bull 10’ trending configuration (with ST > IT and IT > LT).

If we click on the IT tab (see the little green up arrow on the tab showing that it is the ‘timeframe in play’) we can see that the ideal entry zone for a pullback is currently between 2025 and 2048.  That zone is shown as a green highlight on the chart above.  a poke under 2051.25 to take the stops should get us into that ideal entry zone and then we’ll see what happens.

It would take a move under 2025 to start the S&T alarm bells ringing that we have a failed breakout toward the next upside target of 2117, which is where all those resting buy-to-cover bear stops are sitting.

So, that’s the current lay of the land as we watch to see if the pros will eventually form a higher short-term pivot low to shrink the current expanded range and eventually set up a run for new highs.  Or, if something a bit more bearish is potentially afoot.

…my .02

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ES Update

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In my last post I speculated that after filling the breakaway gap at 2105.25 the pros might next pull back to build a higher short-term pivot low– and I pointed out the minimum target for a pullback as the stops under 2064.25.  That minimum pullback target was met yesterday with a poke just below 2064.25 down to a provisional low at 2062 and is being tested right here.  So, head’s up as we watch to see if yesterday’s low at 2062 will hold up in the push down this morning.

This is a pretty easy setup for day traders…ES 2064.25 is the intraday bull/bear line.  VST price action is bullish above and bearish below.

 

Zooming in to the hourly bars to fine tune….

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ES 2064.25 is the line in play early today.  If it holds then we could see a reaction higher to eventually set the new ST higher pivot low.  If so, the next upside target will most likely be the bear’s buy-to-cover stops resting above 2117 and a new all-time high.

If 2064.25 does not hold here, the next VST targets lower are 2051.25 and then the bottom of the ST trident channel currently in line with IT primary trend line support at 2025 area. The trident channel remains intact until/unless we get a breech of that bottom rail (currently near 2025).

The blue trident channel has been the path the trading robots have been fastidiously following since the August 24th IT bottom at 1821.75.  We have the expected pullback from that trident channel center line in progress–but as mentioned above, the minimum pullback (to 2064.25) has now been accomplished and we are now watching here for a potential bounce–or an extension lower.

…my .02

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ES Update

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There hasn’t been much to comment on as we have been awaiting the completion of the current squeeze play that has been in place since the last major buy signal at 1861 pointed out here in real-time on 9/29…

“As I type, the current candidate for a new ST pivot low is 1861 and it meets all the parameters that I have been looking for.”

I also want to point out how ES has been precisely tracking the center line of the trident channel that I also pointed out (shown in blue on the chart above).  The pros absolutely love using these things for black box algorithm guidance–and this is a textbook example of what happens when they are actively engaged in guiding the market toward a predetermined time/price target.

The breakaway gap at 2105.25 (where the engineered takedown to 1851 began on 7/21) has now been filled.  Above that line is where the pros hold all the cards to the downside.  The obvious next target higher from here would be the remaining bear stops from as far back as 5/19 resting just above 2107.  There is a potential downside play setup that could develop from the gap fill here at 2105.25 however, and that is what is causing the pause.

The trident channel is the ‘tell’ here.  When the pros have finished squeezing the bears, price will fall away from the center tine to the downside.  There has not been a new short-term pivot low since 9/29 at 1861, so obviously, this market is long overdue for at least a ST pullback as a direct consequence of the short squeeze to fill the open gap.  The minimum pullback target from right here would be 2064.25.  If the pros wanted to be extra sneaky they could leave those stops above 2107 alone and initiate a takedown from below–but the best scenario for strategic bears patiently waiting for the right time to get short would be an eventual push up and through those buy stops above 2107 and into exhaustion.  Ideally, we would then see unanimous top spotter signals to confirm that exhaustion.

We have attained the first of two major upside targets I pointed out after the last buy signal (the gap fill at 2105.25).  If it is going to sell off to at least a short-term higher pivot low before hitting new highs, this would be the spot.  If so, the minimum pullback target from right here would be 2064.25.  Otherwise, there are guaranteed buyers still remaining above 2107.

Keep an eye on the trident channel center tine…

…my .02

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