ES Update

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In my last post I pointed out the stop sweep/reversal setup at 2030.50 in real-time…

That short-term buy signal has worked out nicely here with today’s rally into the professional bear’s stops above the (now broken) IT/LT downtrend channel and above the VST range top at 2069.50.

There are buyer’s here both from bears covering and from momentum players looking to ride the ST trident channel (dashed light green on the daily bar and hourly bar charts above).  Price is almost to the center line of that trident as I type.

The pros have bears on the run here and S&T is looking for the stops above 2079.75 as the next upside target.  Let’s see what happens right here at the center tine of the light green trident channel.

…my .02

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Russell Indexes Reconstitution 2016

This year’s Russell Indexes Reconstitution will take place after the close on June 24, 2016.

Performed annually, reconstitution ensures that the Russell Indexes continue to accurately reflect the current state of equity markets and their market segments, including market capitalization (e.g., large and small cap), sector breakdowns, and style structure. The 2016 schedule is provided below along with a list of methodology enhancements effective as of this year’s reconstitution.

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Reconstitution 2016 Schedule Rank day

May 27

Preliminary membership lists (including adds and deletes)

June 10

Preliminary reconstitution analysis reports

June 10

Reconstitution adds and deletes appear in daily change file

June 13

Updates to membership lists (including adds and deletes)

June 17 and 24

Reconstitution is final after the close

June 24

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Because many index funds track the Russell indexes, the Russell reconstitution has a ripple effect that changes the constitution of many index funds and affects investors’ holdings and the prices of many stocks.  Some advanced investors, particularly hedge-fund mangers, try to profit from the impending changes by guessing which stocks will be added, removed or switched to a different index and trading in those stocks.  Russell’s transparent stock-picking methodology makes educated guesses about these changes possible.

Ranking Day is next Friday so keep that in mind since the closing prices on that day determine which companies are in or out based by their total market capitalization.  There is much at stake for the financial pirates–so watch out for the annual games leading up to that benchmark event.

For complete details on how the Russell Indexes are constructed I recommend reading:  Russell Index Construction and Methodology

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Stops and Targets tracks the entire Russell 3000 index (representing 98% of all investable US equities) and on June 24th at the close will reconfigure the symbols list to match the final Russell 3000 index.

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Screen Shot 2016-05-19 at 10.25.59 AM

 

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I am still keeping a close eye on the red and green channels on the weekly bar ‘roadmap’ chart above.  This is now week number four of the pullback that began after a stop sweep/reversal above the double top at 2100 pointed out here in real-time.  Today’s early poke under the Stops and Targets short-term primary trend line assures that we now have at least the minimum pullback required to create an eventual higher 4 bar pivot low to pair with the higher pivot high at 2105.25

Professional bears will continue to use the top rail of that red channel as a trailing profit stop for short trades initiated at the 2100 area.  So long as price trades below that channel top bears remain in business for what started out as a counter-trend trade but will revert to a short-term trending trade under 2030.50.  The descending top rail of the bearish channel is presently at the 2071 area.

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ES 2030.50 is the line in play currently.  If we don’t see a stop sweep/reversal here –then the bottom rail of the dark red channel could be the next downside target.  Otherwise, if we were to get a reversal rally above 2030.50 then the first upside resistance target is the descending red trendline built from connecting the last two short-term weekly pivot highs.  Just above is the big LT/IT channel top rail resistance (shown as dashed red).

So, head’s up right here at 2030.50.  That is our bull/bear line as we await the resolution of the anticipated pullback from the stop sweep above 2100.  Price action is bearish below and reverts to bullish above.  The pros now have everything they need here for a short-term stop sweep/reversal setup and a new minimal higher weekly pivot low–if they choose.  It’s all about 2030.50 today.

…my .02

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ES Update

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The weekly bar ‘roadmap’ chart above shows the long-term bullish (green) and bearish (red) trident channels.

What I am watching carefully here is the top rail of the descending bearish channel.  If the current bearish pullback from a poke above the 2100 double top to 2105.25 is to continue…price will NOT likely break above the top rail of that descending channel.

If, however, we get an upside breakout of the top rail of the red channel –then odds increase greatly for a run to new all-time highs and the fifth and possibly final wave of the giant impulse move off of the 2009 low before a significant correction starts.

That long-term descending bearish channel top rail is currently near the 2076 area–or about 20 points above the ES price as I type.

You can see that the pros were using the center tine of the green bullish channel to guide price to the bearish stop sweep above the all-time high at 2100 –and that price has fallen away from that center tine as we have seen profit-taking and bearish speculators selling that initial breakout failure.

If we were to get additional selling–the next major target lower would be the bottom rail of the rising bullish channel (presently near the 1916 area).  The bottom line here is that bulls have the advantage once the current pullback has run its’ course so long as any pullback stays above the bottom rail of the rising green channel, which is a pretty large cushion.  The question is how deep of a pullback will we get.

The top rail of the descending channel is what professional bears are using as a protective stop to lock in accrued profit from their counter-trend entry near 2100.  If that top rail is broken to the upside that will bring in buyers as those bears cover short positions–but so long as price stays under the descending red top rail those same bears might just hang in there to see if they can get a little more to the downside.

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Screen Shot 2016-05-17 at 10.46.06 AM

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Stops and Targets is saying it is all good for bulls above the new primary trend line at 2030.50

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…and the hourly bar chart above fine tunes it all showing what happened at the last two ideal buy zones and the current location of upside resistance targets.

…my .02

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ES Update

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I pointed out the ideal buy zone setup in my last post with a target of 2071.50.  That target has been achieved and we are back to a countertrend bearish setup under that line–so long partials were rewarded from 2030.50 to 2071.50 and the screen capture above explains the options here.

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The daily bar/range chart above tells the whole story…

The broad market has been in a LT trading range between 2100 and 1804.75 for almost a year now.  The first top at 2100 came on May 19, 2015 and then double-topped at the exact same number on July 20, 2015.  We then got the big plunge from the top spotter alerts down to 1804.75 on August 24, 2015–and that was the range where the market traded until a stop sweep/reversal of the bull stops underneath on February 21, 2016 and then a stop sweep/reversal of the bear stops above on April 20th.

We can surmise from the summary above that the pros distributed around the 2100 area and then again just below that line at 2093.25.  They covered and went long in February near the 1793.25 low, which was just low enough to trigger capitulation of the long-term bulls under 1804.75 before reversing and then driving the last of the bears into capitulation by popping just above the 2100 line.  That’s brutal stuff there folks…but it’s how the pros play the game.

Now we are in an interesting situation here…the pros have raided the last of the forced buy stops above 2100, which is also above their distribution line–so if they are done on the end-to-end squeeze from 1804.75 to 2100, there would be absolutely no reason to go back up there again unless the intent is to breakout and run to new all-time highs.  So, we have some counter-trend bearishness creeping into the market here centering around the 2071.50 line shown by Stops and Targets but there are also two sets of prominent trident channels setting up.

Let’s start by explaining the long/intermediate channels and then move in to the short-term channels…

The LT/IT trading ranges will both be 1793.25 to 2093.25 after the close today.  I have already pointed out the dashed green bullish trident channel, whose centerline was guiding the ES squeeze perfectly until the stop run above 2100.  The centerline of that rising IT bullish channel is currently near 2102 and is about 40 points above the current price as I type.

There is also a provisional IT bearish channel that I have now drawn in using dashed bright red lines on the chart above.  I say ‘provisional’ because that top at 2105.25 has not yet been in place long enough to qualify as an official IT top–but the provisional channel shows where price likely will NOT rise above in order for that trident channel trajectory to eventually confirm.  So, just to be clear–for bears to have a shot at something more than just a relatively shallow pullback here–that top rail of the provisional IT bearish channel should not be breached.

Now, let’s move in to the short-term timeframe and look at the two trident channels there…

The ST bearish channel that I pointed out from the 2105.25 top is marked as a dark red parallel dashed lines.  That is a valid channel and is what was being used to drive the trajectory into the recent ideal buy zone (shown as a bright green shaded rectangle).  We got the expected bounce there and have reached the 2071.50 S&T resistance target, which is in play as I type.  As I pointed out on the IT channel–the top rail of that descending channel should NOT be breached if the bears who are playing the stop sweep/reversal from 2105.25 are right.  That descending top rail is currently at 2093 as I type.

There is now a provisional ST bullish trident channel also displayed using parallel light green dashed lines on the chart above.  If bulls are right from the ideal buy zone –the bottom rail of that rising channel should not be breached.  The lower rail of that rising channel is currently at 2041 as I type.

So, basically we have a ST triangle forming here between the descending bearish top rail at 2093 and the rising bullish bottom rail at 2041–with perhaps an earlier tell for bears to eject if we get a break above the descending provisional IT top rail at 2082.

All of that  lines up with the S&T strategy suggestions centering around 2071.50–so keep an eye on the edges of the trident channels for a clue to the next directional breakout.

…my .02

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ES Update

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The above chart uses 60-minute bars to show details of the current setup…

This morning, ES has entered the short-term ‘ideal buy zone’, which is the zone where the gain to risk ratio is at least 3:1 for a trade toward the next upside target at 2071.50

On the hourly bar chart take particular notice of the red horizontal lines:

  1. 2093.25 was the original countertrend sell signal after the 2100 target was achieved.
  2. 2071.50 was the next ST sell signal
  3. 2077.50 was the back-test of the broken ST trendline support
  4. 2045.75 is current confirmed resistance (last week’s low)

We now have the minimal S&T pullback target met and this is the place to consider covering countertrend shorts and to reenter a long position in the direction of the macro trend.

We should next get a pullback here to test support.  If 2026 holds then the next upside target is 2071.50.

If 2026 were to fail–the bottom rail of the descending ST channel (shown as dash red parallel lines on the hourly bar chart above) would be the next downside target.  That descending lower rail is currently near the 2011 area.

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Screen Shot 2016-05-06 at 10.51.59 AM

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Here is the daily bar/range chart showing the same setup from a higher timeframe perspective.

Head’s up here for short-term traders as we watch to see what the pros do at 2026…

…my .02

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