ES Update

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Fun Fact:  If you would have set an automated trade to buy at 2156 and sell at 2160.75 …it would have paid off in each of the last eleven trading days.  That’s right, a measly 4.75 point high/low range has been hit on both sides for 11 days in a row!

Is that boring enough for you?

Perhaps someone told the market pros to ‘shut it down’.  If so, the ‘why’ would be anyone’s guess–though the DNC shindig wrapped up last night and the RNC gala was held the prior week…and that kinda sorta parallels the strangle–but hey, it could just be a coincidence I suppose.  😉

So far today, we have not seen a touch of the lower boundary at 2156–so maybe, just maybe the volatility-strangling shackles are finally coming off.

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Barring something truly extraordinary in the the next couple of hours before the close, the 8th stop sweep/reversal buy point will be officially confirmed and added to our weekly roadmap chart that has been dead-on since 2009.  For those new to reading here, think of the green dots (that mark 4-bar pivot lows) on the weekly chart above as a series of stair steps going up.  The trick has been to carefully watch each of those higher pivot stair steps, once built, for subsequent signals.

In six out of eight prior touches of those last pivot lows we have seen immediate stop sweep/reversal buy signals.  Perfect buy signals!  The most recent buy occurred at point 8 on the chart above as the stops under the previous pivot at 2013 were run down to 1981.50 and then violently (and predictably) reversed.

The paradigm that has been in place since 2009 will not end until/unless one of those higher lows is broken to the downside but does not immediately recover.  Take a look at the chart closely.  the pros have constructed an almost perfect five wave bullish sequence where the sole exceptions previously to a stop sweep/reversal (at points 2 and 6) were the declines that led to the bottoms of what would be classified as three step ‘corrective’ waves two and four in Elliot Wave parlance.

In my opinion, this has all been carefully engineered since the bottom in 2009.  The weekly chart above continues to be the roadmap to what they are doing and how they are doing it.  The newest protective stop for all of those who are gaming this market in the very long term is now moved up to ES 1981.50 at the close today.  So long as any subsequent pullback remains above that new line at 1981.50, the ARRA-gorged liquidity bull lives on.

…my .02

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Have a great weekend everyone.

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ES Update

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ES has been in an extremely boring volatility strangle for the last 8 trading days.  That may be about to change.

I have said it many times before in situations like this;  first they bore everyone into disinterest and then…whammo!

Extended low volatility begets high volatility.

The first minor countertrend sell signal in the VST (very short term) is at 2168.  From here, the pros would need a minimum pullback of 2151 to potentially set a higher ST pivot low, so keep that in mind.  The next downside target if this breaks lower might be the open gap at 2146.

The VST trading range is unusually wide due to the short squeeze after Brexit and there is quite a bit of air above ST support at 2119.50.  Let’s see where they go on the pullback here.  As I said above–minimum pullback would be to 2151 for a potential ST pivot and the volatility strangulation zone is between 2151.25 to 2172.50

Tomorrow is the opening day of the FOMC meeting, with the announcement coming on Wednesday.

…my .02

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ES Update

Several of you noticed the same thing I did yesterday around noontime.  We had an apparent intraday setup in place for unanimous spotter signals across all of the indexes and futures –and there were also huge numbers of Russell 3000 components that were showing spotters …but then the calvary came riding in at about 2 pm and erased most of those spotters.

So, the obvious question I have been getting from many of you is a variation on a basic theme of; ‘what the heck was that all about?’

My best guess is that it has to do with July options expiration tomorrow and the recent Brexit vote trader ambush by the pros…

Those of you who trade options may have received a message from your broker similar to the following just before the Brexit vote on June 24th:

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Dear Valued Clients:

Based on the current market conditions as well as the increased volatility resulting from the BrExit vote, margin requirements have been increased on the following Futures products:

ES       200% of initial margin
NQ      200% of initial margin
TF       200% of initial margin
YM      200% of initial margin

US      200% of initial margin
TY       200% of initial margin

GC      200% of initial margin
SI        200% of initial margin
MGC  200% of initial margin

CL       200% of initial margin
DX      200% of initial margin

These margin changes went into effecting last night (June 23rd) and may remain in effect for the foreseeable future.  

These increased margin rates are in addition to all CME currencies and all EUREX products, both of which are at 200% of initial margin respectively as well as VIX futures which currently are at 300% of initial margin.

Please remember that it is your responsibility to manage your account throughout this unprecedented economic event. While your broker does not want to intervene, it may take any action deemed necessary to manage risk, including, but not limited to, raising margin requirements or liquidating positions at any time should your account fall below existing or revised margin requirements. 

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Okay, to explain what I meant in the paragraph above; ‘trader ambush by the pros’, let’s take a look at the daily bar/range chart…

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The Brexit Vote occurred at the long black bar with the letters ‘ST’ above it.  Take note of where the bear stops and bull stops were located in advance of the Brexit vote volatility.  The bear stops were located above the previous pivot high at 2110.75 and the bull stops were resting under 2040.75 (ST) and 2013 (IT).  Do you see what the pros did there during the contrived Brexit chaos?  They first ran the bear stops above 2110.75 up to 2119.50 and then yanked the rug in a fast move down to 1981.50 to get both levels of bull stops before reversing violently and mercilessly (for the trapped bears) after the major stop sweep that I pointed out there in real-time.

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Stops and Targets had a counter-trend sell signal at 2110.75 and then a counter-trend buy signal at 1985.75 that you can see a little easier on the hourly chart above.  That was pretty darn good!

So, if I am right and the pros intentionally gamed the Brexit result then it would seem reasonable to assume that they sold puts below 2119.50 and bought heavily under 2013 to enrich themselves and to screw the maximum number of players–especially considering the leverage of 200-300% margin requirements.  If so, then yesterday would have been about maintaining the relentless squeeze on the bears and giving no quarter.  The pros have made an absolute killing on this little escapade.

As I mentioned before, it’s all very good above 2119.50 for bulls who bought the major stop sweep/reversal setup after Brexit.  The first Stops and Targets counter-trend sell signal would only be generated on a move under 2119.50.

You certainly don’t have to like the ruthless pros or approve of what they do and how they do it–but it sure does help to understand their mindset and tactics.

FYI: Usually the market reaches major tops in boring conditions when no one is paying attention.  Like I said in my recent post, when the time comes to hit the sell button almost nobody will be psychologically prepared to do so.  But beware–those who get bearish too early will probably get skewered.  It takes patience to wait for a setup to play out.

For now, there is absolutely nothing technically bearish about this market > 2119.50…so those of you Type A’s out there looking to maybe get ahead of things and jump on the short side probably need to be very suspect of your ‘gut feelings’ (and what we all would agree is basic common sense) to wait for a setup and then confirmation.  Stops and Targets will catch a turn when it eventually comes–as it always does.  The pros won’t make it easy and they never do–but the best odds of competing with them in their own rigged game comes by always trading on the right side of the trends.  Always!  You impatient top-pickers out there know who you are.  Don’t do it.  Don’t even think about it.  Step away from the computer when you get a ‘gut feeling’ that the time has come to make a bold instinctive move–in spite of what your instruments (Stops and Targets) say.  The pros are very good at deftly manipulating your ‘feelings’…very VERY good, as a matter of fact.  Patience.  That’s the key.

Meanwhile we are at all-time highs here with no resistance above.  Embrace the interminable madness of the pros and go with the flow.  The trend is your friend–until it ain’t.  Again, it’s all good for bulls above 2119.50.  My advice is don’t even look at spotter signals until the end of the day, which is the only time they are valid anyway.  They are always counter-trend and can really mess with your trend-following tactics and your bias if you fail to see them for what they are intended to be.

…my .02

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ES Update

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In my last post I pointed out in real-time the major buy signal at ES 2013 from the weekly paradigm chart that has been dead-on since 2009.  We won’t know for sure for another two weeks–but it is certainly looking good for perfect stop sweep/reversal buy signal number 8 (see numbered references on the weekly chart above).

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The daily bar/range chart above shows a trending breakout in all timeframes above 2119.50.  Since the market is at new all-time highs there are no classic resistance targets remaining above–but we are approaching the top rail of the short-term trident channel (shown as dotted lines on the chart above).  That rising top rail is currently near 2138, which would be a confluence with a back kiss of old (now broken) IT trendline support–so head’s up at that price.  This is the first major profit target of the IT buy signal from 2013.

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Zooming in the the hourly bars, we can see the top of that ST trident channel with all the associated support levels underneath.

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A break under 2119.50 would generate a short-term counter-trend sell signal from Stops and Targets, which is now in ‘push the trailing stops up’ protection mode–to lock in accrued profits above that line.

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ES has now finally touched the VLT (very long-term) projection target at 2123.35 that I have been emphasizing since the original VLT technical breakout way back in September of 2012–so at long last we are officially ‘here’.

In a perfect scenario, when the momentum eventually stalls we could see unanimous top spotter signals form (at stopsandtargets.com) across the major indexes and index futures, with massive numbers of confirmation spotters in the internal Russell 3000 components.  If/when that happens–my personal instinct would be to get out, and quickly.

The same would be true if a pullback were to take out the last 4-bar pivot low on the weekly paradigm chart (ES 1981.50 is the current last pivot candidate) –and not recover back above that line.

In the meantime, let’s see where the pros go with this breakout to new highs.  All trends are up above 2119.50 but we are closing in on the top rail of the short-term bullish channel, as pointed out above, and that is worth some extra caution.

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The market looks fabulous here at new highs –now up 442% since the 2009 bear market bottom.  But the underlying ‘real’ economy, well–not so much…

http://www.usdebtclock.org

US citizens are now 19.3 TRILLION dollars in debt (and will soon be at 21 trillion)!  There is not much to be encouraged about for the current direction of the economy after carefully studying all of the individual components in the link above.

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I thought it might be fun to visualize just how much ONE trillion dollars can buy (thanks to Kiplinger Finance for the examples) …

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How much is $1 trillion? To help you wrap your head around that mind-boggling number, and to try to put deficit spending into perspective, we did some mental shopping:

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One TRILLION dollars would buy:

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42 MILLION NEW CARS

At a sticker price of $23,810 each, $1 trillion would let you buy a brand new car for about 40% of all American families.

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5.6 MILLION Typical American Homes

The national median price for existing single-family homes is $177,900. There are about 80 million detached, single-family homes in the U.S., according to the NAR and the Census Bureau..

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140 BILLION HOURS OF LABOR

That’s calculated at the federal minimum wage of $7.25 an hour. Still hard to get your mind around? How about this: One trillion dollars is enough to hire all 2.8 million residents of the state of Kansas — men, women and children — in full-time, minimum-wage jobs for the next 23 years!

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A YEAR’S SALARY FOR 18 MILLION TEACHERS

According to the National Education Association, the average elementary school teacher salary in the U.S. is about $55,300. NEA estimates that there are about 2 million elementary school teachers, so $1 trillion would cover their salaries for 9 years!

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CONGRESS FOR THE NEXT 10,742 YEARS

The current salary for rank-and-file members of the House of Representatives and the U.S. Senate is $174,000. That’s 535 lawmakers — not counting their staffs or the extras paid to congressional leaders.

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56.8 MILLION U.S. ARMY PRIVATES

Annual basic pay for an active-duty U.S. Army private with less than two years of experience is $17,611 a year. So $1 trillion goes a mighty long way, even by military spending standards. To put that in perspective, 56.8 million is more than 100 times the total number of active-duty soldiers in the Army today!

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19.2 MILLION AMERICAN FAMILIES’ TOTAL INCOMES

Median household income in the U.S. (half the families earn more, half earn less) is $52,029, according to the Bureau of the Census. There are about 100 million families in the country, so $1 trillion is enough to cover the income of about one-in-five families.

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$1 MILLION SPENDING EVERY DAY FOR NEARLY 3,000 YEARS!

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…now MULTIPLY one trillion by TWELVE! 

12 TRILLION DOLLARS is the amount of additional debt that has been added by our political leadership in both parties (the uniparty) since 2008!

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So, what did we get for that staggering amount of new debt?

According to the BLS data nearly 100 million able-bodied Americans are currently out of the workforce–including those who are unemployed seeking work and those who have given up trying to find employment!

Meanwhile, we have also reached a dubious tipping point in society– OVER HALF of all Americans now receive one or more government benefits!

Not good.

If/when this thing finally rolls over…it likely isn’t going to be pretty.  “You see, the problem with socialism,” as Margaret Thatcher once so astutely observed, “is that you eventually run out of other people’s money”.

I’ll let you know right here when the weekly paradigm, that has been in place since 2009, finally ends–but it is a good idea to heed the wise old stock market adage …Be fearful when others are greedy, and be greedy when others are fearful.  

Back in 2009, not many bears wanted to hear the message to buy at the bottom.  I have no idea when a major top will come–but when it finally does, I am pretty sure that not many bulls will want to hear the flip side of that message either.  Stops and Targets will catch the big turn when it comes–and I will point it out right here.

In the short-term, let’s watch ES 2138, which is just 4 points higher as I type, and then see how it goes.

…my .02

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