ES Update

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The weekly bar chart above has been the ultimate roadmap for the market rigging that has been going on since 2009…

When you look at the chart above think about five waves and then notice the two yellow highlighted ovals that show the only two exceptions to the stop sweep/reversal pattern whereby the pros immediately reversed at each poke below the last higher low as happened at points 1,3,4,5, and now 7.

Point 2 and 6 indicated where major pullbacks occurred that were NOT immediately bought and those indicated the major pullback waves 2 and 4, if my ongoing thesis remains correct.  Point 3 and now point 7 are the stop sweep/reversals used to create double bottoms after the wave 2 and wave 4 pullbacks completed.

If the game continues as it has since 2009 then we could be starting wave 5 now that will ultimately go to new highs and finish the engineered impulse off the bottom that has been fueled by funny money injected into the markets starting with ARRA and continued with quantitative easing, which is just a fancy way of describing blatent market rigging by the central banks.

So, let’s talk some more about the weekly chart above…

The recent low at 1804.25 came at the precise bottom of a shallow parallel bearish channel (see descending red channel lines on the chart above).  If the pros were looking to create the maximum amount of bearishness with the absolute minimum amount of structural damage, while creating a three segment ‘corrective’ wave 4–that is exactly what they have thus far achieved.

Note that the pro’s ultimate pullback target was a stop sweep/reversal under the LT range bottom at 1814.  Also note that we have had no weekly closes under the last higher pivot low at 1853.25–so they have stuck to the paradigm yet again!  The current weekly bar closes today and they have already painted a higher high/higher low for the week, which is bullish, and if today’s close remains strong we could also have have a higher weekly bar close, which is a technical reversal signal.

Seriously, you have got to love that weekly chart!  Now, of course, there is no guarantee that the current bullish configuration will continue to hold–but if it does, remember that weekly chart above and how deadly accurate it has been in showing how and why the pros have been doing what they are doing for the past 7 years.

The fourth wave in an impulse is always the trickiest to trade and if this double bottom holds here the market action since July of last year has been treacherous, to be sure–but Stops and Targets has been dead on with the analysis and trade signals.  It is rare that a Bull 9 does not transition back to a Bull 10 (basically, that only happens at the start of a major wave 2/wave 4 pullback) and the double top (to the absolute penny) in July followed by the lower high in November was a very nice piece of subterfuge by the pros.

The market is now more than 100 points off the recent bottom and we have the anticipated major stop sweep/reversal in hand.  Let’s see how it goes from here on–but if this is the start of a new major wave higher then things could start to get a bit more challenging for the bears who have been enjoying a sweet ride over the past month.  Failed rallies could be replaced by failed pullbacks if the pros have indeed switched sides back to the bulls now that they have covered and reloaded.  We should know that soon enough.  Just pay attention to the pressure exerted to see which side gets trapped and hammered.

I have had some interesting talks with fellow analysts and traders recently and most of them have been scared to death by the market.  Some have experienced huge paper losses on core positions.  My analytical take all along has been that we were either going to get a bounce centered around 1853.25/1814 area at the bottom of the LT range…or that in a worse-case scenario we could see a drop to the rising VLT trendline.  It is looking promising for a bounce from the pro’s minimum pullback target to LT support at 1814, which was also the main downside target in Stops and Targets.  The last major bull/bear line I pointed out at 1804.25 is looking pretty good at this point.

Make no mistake, this market is being carefully engineered as I have pointed out many times in the past.  It helps to have a roadmap of what the pros are doing–and the chart above, coupled with the trading signals generated by Stops and Targets, is just that.  This is about as close to being a legal ‘insider’ as it gets.

Hope everyone has a great weekend.

…my .02

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ES Update

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Let’s take a look at the weekly chart that has been such an excellent roadmap since the start of the current US regime…

The pros have been engineering (manipulating) the market higher since 2009 by building a series of higher 4-bar pivot lows on the ES weekly chart.  I have marked each of those 4-bar pivot lows with a small green dot on the chart above (I have also marked the 4-bar pivot highs with red dots).  There have been 26 pivot lows since the market bottomed at 498.50 (adjusted for continuous contract pricing) in March of 2009.

Counting the current setup, there have now been just 7 instances where a pullback has dipped below the last higher pivot low.  In every instance except two, marked as points number 2 and 6 on the chart above, a dip was immediately bought and became what I often refer to as a ‘stop sweep/reversal’.  In other words, the pros drove the market down to run the stops under the last pivot low and then immediately turned and burned back in the other direction.  Stop sweep/reversals happened at points 1,3,4, and 5 and each was an ideal opportunity to buy and rejoin the macro uptrend.

I have commented in many previous posts about a potential 4th wave down structure and so what we would be most interested in examining is the first major pullback in this macro bull market at points 2 and 3…

The steep drop preceding point 2 is reminiscent of what happened at point 6.  The difference after point 6 was that we did not get a double bottom stop sweep/reversal flush like at point 3 where the paradigm resumed after the stops under point 2 were swept.  Instead, we got a higher pivot at 1853.25 and then a rally that failed to take out the previous high, similar to what happened after point 2, which created a red trendline resistance that was eventually broken to the upside in December of 2011 (marked by a green arrow).

With yesterday’s poke under LT range bottom at 1814 we are again presented with a potential double bottom with a stop sweep/reversal at the provisional point number 7.  If the paradigm continues to work perfectly, then point 6 could work the same as point 2 if we get a double bottom.  So, for obvious reasons–let’s set a new bull/bear line at yesterday’s low at 1804.25.

Catching knives can be an expensive hobby, so as I have mentioned in previous posts–I am just pointing out the potential bounce points during this steep pullback.  If yesterday’s low can’t hold then the rising VLT trendline support would be the next major target to the downside.  If we do get an echo of what happened after point 3 then we could get a violent rally and perhaps even an eventual shot at a new high sometime down the road if wave 5 were to launch.  I know that probably sounds silly to most as this market has suffered devastating losses recently–but it didn’t feel too great at point 3 either, as some may recall.

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Stops and Targets is showing a LT buy setup right here, with partials buy-to-cover signals for short trades in the IT and ST timeframe.  Head’s up as we navigate what could be a potential double bottom stop sweep/reversal setup if the global socialists currently meeting in Davos decide to take the foot off of the bull’s necks and give the thumbs up to the pros to resume the macro uptrend.

So, the short version here is that we are currently testing the bottom of the LT range at 1814 and also are testing whether we will get another stop sweep/reversal centered around the last higher pivot low at 1853.25.  If a reversal is going to happen then it should come quickly (probably within one week)–as it did at points 1,3,4 and 5.  Otherwise, the paradigm will be challenged and we could see a move down to the rising trendline support next.

…my .02

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ES Update

The ES futures were down 50 points overnight and the Dow futures were down 400 points at the open today!

Needless to say, many of yesterday’s massive spotter signals will likely be invalidated.

Today is January OpEx (options expiration) and if you are bearish, today’s open was pretty fun.  If you are long, then not so much…

That was a significant (and very curious) takedown last night on essentially no ‘news’–and as I mentioned yesterday, I will now lay out the trading scenarios ahead as those key support levels at the bottom of the IT and LT range come into play…

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On the monthly chart above the key level for the current bar was last month’s low at 1983.25.  Once that was broken to the downside heavy selling began.  The next monthly target lower once a rout began was the October low under 1875.25.  That was accomplished yesterday and is likely the reason that buy programs lit off once the stop sweep was finished.  Those buy programs from that target gave us the initial spotter setup yesterday, which of course has now been crushed by the overnight action.

If one looks at the lows of the September bar (1853.25) and the August bar (1814) those become the next targets lower.  I have also drawn in two key rising trend lines on the monthly chart.  The first one is quarterly support and as I type that is sitting at approximately 1833.  The longer trendline represents the very long term macro trend using yearly pivots and it is sitting at approximately 1698.

Let’s use some Elliot Wave-style terminology to describe what might be going on here from a macro perspective.  I am not an Elliot wave guy, but it can serve to illustrate a potential setup here.  The basics to understand is that impulsive waves in the direction of the trend usually have five segments.

The first wave off the bottom in 2009 was 1, the pullback in 2011 was 2, the long advance to break out of the old secular bear downtrend and top at 2109.25 was 3, and the current wave is 4.  Fourth waves are always the most tricky to trade.  Many people assume that the macro trend is over and that a new bear has begun.  While that could eventually happen, the market would have to break the VLT trendline to change that macro trending structure.  That is what happened in the opposite direction back in September of 2012 when ES broke through the previous red VLT trendline to the upside to end the secular bear and usher in the current secular bull.

So, from a macro perspective this nasty pullback sure ain’t fun for bulls–but it is not out of line with the macro trend so long as that VLT trendline ultimately remains intact.  After 4th waves typically come the fifth wave up.  So long as the VLT macro trendline remains intact that is what one continues to expect using the Elliot analogy.  For now, though, we are navigating through the treacherous wave 4.

So, the takeaway from the monthly bars is that support was broken at 1983.25, and I warned that was a biggie at the time, and now we have tagged the first monthly downside target at 1875.25.  The market is next threatening 1853.25 with the LT trendline support next.

What I don’t know and can’t possibly predict is whether the bounce into the next wave up (if/when it comes) will be above the LT trendline or not.  If that trendline were to be broken to the downside then we could see a regression to the VLT trendline.  So keep an eye on the two support trendlines on the chart above if we get more selling from here.

The next monthly bar target lower is the September low at 1853.25, which also happens to be the bottom of the current IT trading range.

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The weekly bar chart has been our road map to the pro’s market rigging strategy since 2009.  As I have stated many times before we will know when the paradigm has changed when we get a breakdown below the last higher pivot that does not immediately reverse.  I have numbered all the support pivots on the chart above that have been broken.  The only time we got a breakdown that did not recover to create a higher pivot low was at point 2 and what I am referring to as the 2nd wave in my commentary above.

The last higher pivot low was at 1853.25 and that is the key line in play right here.  If that is broken to the downside, one first looks for a stop sweep/reversal play like we saw at points 1,3,4, and 5.  If we get a breakdown that doesn’t recover then 1814 would be the next line in play and then the VLT trendline.

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The daily bar/range chart shows the IT range bottom at 1853.25 and the rising LT trendline just below. Those are the next key support objects below.

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The hourly bar chart above further refines the support and resistance levels. The most aggressive bears are trailing tight stops now and will likely begin to cover on a break above the descending gray trendline resistance.  It would take a move above 1946.50 to flip the VST trend back up.

…my .02

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Bottom Spotters

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Okay, now we finally have in place what I have been looking for recently…

Today we got unanimous bottom spotter signals across ALL of the major cash and futures indexes.  There were also 1,155 (one thousand one hundred and fifty five!) new bottom spotter signals generated across the Russell 3000 and ETFs!

As spotters go, this is about as strong as it gets for a potential turn signal.  Unanimous cash and futures indexes with huge numbers of Russell 3000 component spotters is what I always preach about–so let’s see how this goes from here.  With spotters, as always, we need to see an eventual confirmation of the setup signal –and price on any pullback absolutely must remain above today’s signal bar low for the spotter to remain valid.

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If this bottom spotter signal ultimately holds up then you certainly can’t ask for more from Stops and Targets in diagnosing the macro trend configuration and then generating cascading trade signals.  It showed an intermediate trend resistance sell and bearish bias switch at 2017.25 on January 4th and a short-term trend continuation sell at the key support breakdown at 1983.25 on January 7th  Today we got a bounce inside the long-term ideal buy zone along with massive numbers of spotters.

These sort of unanimous and massive spotter setups don’t come along very often.  When spotters hold and then confirm from this type of setup they have an amazing track record of pointing out major turns.

The bottom of the intermediate range is at 1853.25 and the bottom of the long-term range is at 1814.  If this current massive spotter signal setup were to fail, and it certainly could, those two support lines would become extremely important in a continuing downtrend.  If they were to fail we would get a key test of the market-rigging paradigm that has been in place since 2009.  I will explain that in a later post, if it becomes necessary.

So, a very big head’s up here to S&T fans.  IT and ST trends are still down as we watch to see if the LT bulls can overwhelm the IT and ST bears and eventually flip those trends back up.  A subsequent close above 1927.50 will confirm the spotter on ES.  However, a dip below 1871 on a pullback…and all bets for this rare setup would be off.

…my .02

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ES Update

In my last post I pointed out that the market was set up for spotter signals across the indexes and futures.  We got those spotter signals yesterday across nearly all the major index cash and futures symbols (lone exception was the NASDAQ Composite)…

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It wasn’t an impressive close yesterday so now I am watching to see if we can get follow-through on a rally from these deeply oversold conditions.  There have been several recent small rally attempts that have been beaten back by sellers, so this in an interesting juncture as we watch for potential signs of a change.

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We had 441 new bottom spotters yesterday within the Russell 3000, which is a fairly sizable number, though not overwhelming…

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A tradable bottom when it comes usually ‘feels’ terrible in real-time …and the pros will do all they can to exhaust and punish the knife-catchers until the speculative buyers finally dry up.  When that finally happens the game switches from squeezing the bulls to running the bears.  As always, one has to be careful not to get too excited about catching a bottom until we start to get large numbers of confirmations on the spotters.  The initial bottom spotter signals are there but the market needs to start showing some follow-through to set the hook.  As always, any spotter signal will be immediately erased if price trades below the spotter bar low.

Head’s up here as we watch to see what happens on the close today.  NYSE decliners are leading advancers by a ratio of more than 2:1 as I type–but when the pros finally decide to light off the buy programs and flip the game there likely won’t be much advance warning for the players.  Bears should be very careful here to protect profits so long as those spotter signals are in place.

…my .02

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