Russell Reconstitution Day

Today should be one of the busiest trading days of the year for the US equity market, as investment managers are obliged to adjust their portfolios to align with the annual Russell Equity Index Reconstitution.

Additions and Deletions to the Russell 3000 Index (which is tracked by Stops and Targets) become official at the close of trading today.  For complete details on what is being added and what is being removed follow this link to the FTSE/Russell Reconstitution homepage:

https://www.ftserussell.com/research-insights/russell-reconstitution

Stops and Targets will reconstitute the tracked equity list once the official final FTSE/Russell list is released (usually on Monday but sometimes over the weekend).

The volatility might get a little crazy today in affected issues, and trading volumes will be huge–so head’s up!

Today is the day that the index tracking funds get fleeced by the pros.  It is distribution time–at top dollar, of course.

…my .02

.

.

S&P 500 Futures Update

Stops and Targets S&P 500 Futures
Stops and Targets S&P 500 Futures

click image to enlarge

.

Two things to point out as we check in on the S&P 500 Futures on the first day after quarterly quadruple witching expiration:

  1. The previous Top Spotter setup signal never confirmed and has been invalidated today.  That was pretty much expected as explained in my last post.
  2. The Stops and Targets short-term stop/reverse line has finally moved higher after being stuck in limbo for what seems like forever.  Short-term stops from the gap fill stop/reverse buy at 2343 (adjusted for September contract pricing) that I pointed out on 5/17 now move up to 2412.50 to lock in profit.  *ES 2443.50 would be the first place for a counter-trend sell signal, should this poke back up falter.

.

.

S&P 500 Futures Hourly Bars
S&P 500 Futures Hourly Bars

click image to enlarge

.

Hate to sound like a broken record but we are right back to a touch of the Trump Trident Channel centerline right here.  That centerline has been acting as resistance for the past few months, so it’s worth watching again to see what happens.  This market has been absolutely guided by that powerful channel since election day in November.  At some point the channel paradigm will change and watching that centerline for clues is a pretty good way to keep your finger on the pulse.  That centerline was originally acting as powerful support but has been acting as resistance since early April.

.

.

S&P 500 Futures Daily Bar/Range Chart
S&P 500 Futures Daily Bar/Range Chart

click image to enlarge

.

The daily bar/range chart above shows the new higher short-term stop/reversal line at 2412.50 and the continuing interaction with the centerline of the Trump Trident Channel (shown in blue).  We are at that centerline resistance again, as I type.  If price turns back down then the first Stops and Targets counter-trend sell signal will be under 2412.50 and were that to happen we could conceivably see a move down to the bottom rail of the blue trident channel.  First things first, though, and for now all major trends are up above 2412.50 as we watch to see what happens here at the centerline.

.

.

S&P 500 Futures Monthly Bars
S&P 500 Futures Monthly Bars

click image to enlarge

.

Checking in on the monthly bars… The S&P 500 futures remain on track for the ‘price’ component of the very-long-term time/price target–but to my eye we might expect a correction at some point since the current ‘time’ trajectory angle appears perhaps a little too steep to be sustainable.

It’s all good until it ain’t for bulls and for now the nearest stop/reversal line is at 2412.50 as this market feels higher for a point of exhaustion for bulls and capitulation for bears.  I have been saying for some time now that when a tradable top eventually comes, I would expect unanimous confirmed top spotter signals on the indexes, which would be supported by corresponding huge numbers in the Russell 3000.  We didn’t get either of those with the (unconfirmed and now invalidated) spotters on 5/9.

I know the analysis has been a bit boring recently but this is the market we are in.  As I have said many times in the past…first the pros will bore you to tears–and then whammo, when least expected, the big move comes!  They have certainly been boring us in some respects as the sideways/up squeeze has progressed since losing the trident channel centerline support back in April.  With the close of the June contracts last Friday the pros will now have some distribution to attend to as they dispose of all the called equities.  What comes after that distribution is complete might be interesting…so stay alert for a change in the pattern and keep pushing those protective profit stops higher.

…my .02

.

.

*Edit on 6/20/17:  The first short-term counter-trend sell signal from the current configuration would come on a move under 2443.50.  I incorrectly wrote 2412.50 in yesterday’s post under point 2 in the first section (now corrected).  ES 2412.50 is, in fact, the place where the first trend change would occur on a move underneath that new short-term stop/reverse line.

.

.

 

Top Spotter Alerts

Stops and Targets Signals Matrix Summary June 9th Close
Stops and Targets Signals Matrix Summary June 9th Close

click image to enlarge

.

The screen capture above shows the Stops and Targets Signals Matrix Summary page at the close on Friday.  There were top spotter alerts for S&P 500, NASDAQ Composite, Russell 3000, S&P 500 Futures, and the NASDAQ 100 Futures.  The Dow and Dow futures did not show spotter signals, so it was not unanimous for the indexes.

Also note the far right column for the Bottom Five Industry Groups that it was tech stocks that lead the way down on the day.  Those issues took a beating.

.

.

Spotter Signals June 9th
Spotter Signals June 9th

click image to enlarge

.

Taking a peek at the Spotter Signals page at Stops and Targets (see screen capture above) there were a total of 235 new Top Spotter signals on the day, which is not an overwhelming confirmation but not completely insignificant either.

So, taken together what does that mean?  To me, there was a jolt delivered by selling that was concentrated largely in tech.  The indexes were not unanimous and there was not a huge confirmation in the Russell 3000 stocks (which is what is shown in the Spotter Signals screenshot above).  So this falls in line with what I have been posting recently that the market is definitely susceptible here underneath the Trump Trident Channel centerline and has been overdue for at least a short-term pullback.

.

.

S&P 500 Futures Daily Bar/Range Chart
S&P 500 Futures Daily Bar/Range Chart

click image to enlarge

.

The dominant feature since the November election has been the Trump Trident Channel centerline that is shown in the screen capture above.  Price has been pinned to that trajectory, which has acted like a tractor beam.  Lately price has been bouncing primarily off the bottom of that centerline, which has been acting as resistance.  It happened again at a back-kiss touch on Friday but hasn’t yet pulled away.

The Top Spotter signal is a definite warning but we would need to see a close under Friday’s low of 2412.50 before getting a confirmation.  Notice that today so far has just been an inside bar relative to Friday’s bar range of 2412.50 to 2443.50.  A move back above the spotter signal at 2443.50 would immediately invalidate it, whereas a close below 2412.50 would bring additional selling and trigger a confirmation.

I have drawn in a preliminary bearish channel in magenta that shows where price should be constrained if the spotter holds.  Of course, that is invalidated if broken to the upside.

ES has already pulled back enough on Friday to meet the minimum requirement for a new higher short-term pivot low, so they might push it back up to new highs from here and negate that spotter.  It is hard for me to get real excited at this setup from a bearish perspective–but anytime a valid spotter signal is in place one should be wary of betting against it.

.

.

S&P 500 Futures Hourly Bars
S&P 500 Futures Hourly Bars

click image to enlarge

.

The hourly bars in the screen capture above show the very-short-term setup nicely.  The selling on Friday bounced off VST support at 2415.50.  To continue lower, that level would have to fail as support.  If that happens then the stops under 2400.50 would be the next target lower.  ES 2395.75, which corresponds to a gap fill, is the next target with multiple weaker support levels above the next major target, which would be short-term stops under 2342.25.  So, not a terribly compelling set of options just under current levels–unless a bigger break is coming.

The technical setup here is simple.  The intraday stop/reverse line is at 2412.50.  Price action is very-short-term bullish above but would flip bearish below–especially if we were to see a daily close under that spotter confirmation line.

Spotter alerts are interesting and can be a great signal to remind you to start paying close attention and also to double-check your trailing stop placement strategy, but we always need to see a confirmation from a close under the signal bar low before a spotter becomes confirmed and official.

I think it remains all about the Trump Trident Channel centerline and 2412.50 on the S&P 500 Futures for the next few days as we approach quadruple witching on Friday.  A downside plunge is possible from this setup so long as the spotter remains valid but if price pops above the tentative bearish channel (magenta lines on the charts above) top rail and back above the Trump Trident centerline then all bearish bets are off.

…my .02

.

.

 

 

Options Rollover Day

Stops and Targets ES 6-8-17
Stops and Targets ES 6-8-17

.

Today is June Options Rollover Day and volume shifts from the June 2017 to Septembers 2017 futures contract with a difference of –2.25 points from ESM17 (June) to ESU17 (September).

All previous chart numbers have been adjusted to reflect the new contract pricing—so, for example, the long-term primary trend line from the expiring June contract at 2020.25 now becomes 2018, and so forth.

.

.

I have redrawn all my charts to reflect the new contract pricing….

.

S&P 500 Futures Monthly
S&P 500 Futures Monthly

(click on image above to enlarge)

.

The monthly bar for S&P 500 Futures (futures symbol: ES) is bullish with a higher high and higher low.  The monthly candlestick body stays white above the May close at 2408.75.  My running thesis postulates that the broad market is being engineered higher using a five wave impulse pattern (shown on the chart above) and that we are likely in the fifth wave now with an approximate price extension target at 2515 and time extension in April of 2018.  Those targets are just for visualization purposes and are not likely to be precise on either axis–but you have to admit, what looked pretty silly to many when I first posted the extension target several years ago is looking pretty darned prescient at this point.

.

.

S&P 500 Futures Weekly
S&P 500 Futures Weekly

(click on image above to enlarge)

.

The weekly bar shows ES 2315.50 (September contract pricing) as the hard deck for the paradigm that has been in play since 2009.  It is all good for broad market investors above that line.  The current paradigm will end when we get a move below that last higher 4-bar pivot low that is NOT immediately reversed.  The big boy trailing profit stops for major bullish players are located just UNDER that last higher pivot low line and that is why the pros have been periodically driving the market down to raid those soft targets (see points 1,3,4,5,7,8, and 9 on the chart above).

..

.

S&P 500 Futures Daily/Range
S&P 500 Futures Daily/Range

(click on image above to enlarge)

.

The major feature in play is the Trump Trident Channel that I have pointed out previously here.  That channel is shown as parallel dashed blue lines on the chart above and the center of the channel is shown as dotted blue.  Note how price has been pinned to the glide slope since after the election on November 8th.  As I pointed out before, that centerline was support for price action until the first close below on April 5th.  Since then the centerline has acted more as resistance to a market that has been bumping up under that line.  That is a key clue here and what I am watching for is a move down from that resistance, which will break the pattern.  I am much more cautious here as a result of the resistance characteristics of the trident channel centerline but would switch bias on a move back above.  The market is likely extended here from the bear-punishing push up from the gap fill on 5/18 at 2345.25.  At a minimum, we would be looking for an eventual pullback to at least move the short-term stop/reverse line higher.  That line has been stagnant since the gap fill.  It will not take much of a move down to accomplish that minimum target due to the sideways actions recently.

.

.

S&P 500 Futures Hourly
S&P 500 Futures Hourly

(click on image above to enlarge)

.

Zooming in to look at the hourly bars you can see just how precise that Trump Trident Channel centerline has been in guiding price.  That’s the key feature to watch.  For speculators, bias is cautiously bearish below but returns to bullish above.  The June contract has rolled over today and expiration is next Friday.  Clearly, the pros have been long up to now and pushing this market higher–but we will have to wait and see what happens once the Quadruple-Witching loot is safely in the bank.

I suggest watching ES price action relative to the Trump Trident centerline for clues.

…my .02

.

.