S&P 500 Futures Update

S&P 500 Futures - Hourly Bars
S&P 500 Futures – Hourly Bars

(click image to enlarge)

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Quick recap of recent action for S&P 500 Futures…

  1. We had the bear stop sweep above 2480.50 culminating in a top spotter at 2488.50
  2. The pros back-filled the initial breakaway gap at 2471.25 and then yanked the rug in the overnight market.
  3. Sellers showed-up right on cue the next morning on a break under old short-term support at 2457.
  4. The first drive down reversed near a confluence of targets setting the bottom rail of the spotter channel at 2430.25.
  5. The snap-back rally terminated exactly at the top rail of the spotter channel at 2474.
  6. The big push down swept the stops under 2430.25 and has achieved the minimum pullback target for the intermediate time frame setting up a potential next higher pivot low at 2415.75 (which is important for the weekly bar paradigm).
  7. After some churning under 2430.25 we now have the hook back up into a new short-term trading range between 2415.75 to 2474

If the pros stick with the usual protocol then we may have seen the lows for a while set at 2415.75.  That remains to be seen, of course, and there is resistance right above this area at 2457 (old short-term support) then at the upper rail of descending spotter channel, which is currently near 2461.50 area.  The trailing bear stops for many traders are likely sitting right above that channel top.

If ES can make it through those resistance targets then the target for this upside move would be the top of the contracting short-term range envelope which is currently at 2474.  Price would have to clear that level to make minimums to set at least a new lower short-term pivot high.

This is a trading range so there is room to wiggle around some–but the new hard deck is the low at 2415.75, which if it holds up can eventually morph into the next higher low on the weekly paradigm chart.  We’ll have to wait and see how it goes in the next week or so–but if I were pulling the levers then I might start working back higher from here.

I have drawn in a very short term bullish trident channel in light green.  The push up went directly to the centerline and has retreated to the level of the old very short term bearish channel breakout at 2442.50.  Let’s watch right here and see if ES can get a foothold.

Intraday trading range is 2430.25 to 2457…buyers are waiting above and sellers below.

…my .02

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S&P 500 Futures Update

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

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

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Ya gotta love those Spotter Signals!

ES hit the top of the Spotter Channel dead-on yesterday afternoon (see charts above) and has been in freefall since.

The downside target for today is the open gap from 8/11, which is at 2440 on the daily bars but was 2440.75 on the hourly bars (and was just filled).

Let’s watch and see what happens when that daily bar gap at 2440 gets filled.

You may remember that in recent posts I said that if I were pulling the levers that I would wait until this week to potentially poke under the line at 2430.25 on the weekly chart in order to set a minimum pullback to potentially raise the hard deck on the weekly bar paradigm.  If the gap is filled and we don’t get a hard bounce afterwards–then the ultimate pro plan might be to go down and run stops under 2430.25, which would gin up plenty of panicked sellers to give the pros the opportunity to cover their short positions without running the market back up against themselves.

So, let’s watch what happens right here at 2440…and then under 2430.25 if they go there.

…my .02

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S&P 500 Futures Option Update

Depending on how you were positioned going into the day–yesterday was either LOTS of fun…or definitely NOT fun at all!

You gotta love Stops and Targets’ Top Spotters.  The unanimous top spotter alerts on August 8th were a clear warning for what was coming.

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S&P 500 Futures - Hourly Bars
S&P 500 Futures – Hourly Bars

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Using the hourly bar chart above as a guide, let’s recap what happened after the Spotter Alerts and why…

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In my last post I pointed out several important levels, each of which came into play.

* On August 8th we got unanimous index and index futures spotter signals.

* On the 9th there was an initial dip followed by a run back up to close the gap at 2471.25 near the close.  That dip was a trap for bears shorting ‘in the hole’ (under the previous day’s close) on the open.  The pros obliged by running those short positions back through the opening gap at 2471.25, thereby ensuring that all bears who entered on 8/9 were at loss at the market close in order to shake them off before the big move lower kicked off.

* The real move down started in the overnight session just after the gap fill at 2471.25.

* By the time the market opened yesterday, the overnight bear train had already left the station and any bears who wanted to join the fun would have had to short way in the hole.  Those bears would have still been licking wounds incurred the day before on the squeeze into the close.  My assumption is that most bears missed the selloff yesterday.

* After the gap fill, ES was pushed lower by the pros (who were short) and took out the support band I pointed out down to 2445 and then moved under the tentative spotter channel bottom rail to the final trendline breakout target at 2437 with a small overshoot.

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Today, I have added a new line to the chart at 2439.  That line represents the minimum pullback target for ES to establish a potential higher pivot low in the intermediate timeframe.  Now that objective has been reached, there isn’t much incentive for the pros to go lower today–so we could get a bounce right here to again take out late bears who missed the buy-to-cover targets.  I have also adjusted the spotter channel slightly, after a small downside breach, to set the upper rail for later.

The resistance targets to the upside are the same ones I pointed out on the trip down: 2445, 2451.50, and 2457.  Those would be the places where bears shorted a breakdown of support yesterday and there should be buy-to-cover trailing stops lurking just above (along with dip-buying bulls who are underwater and might also be itching to sell to break even).

Now, there still could be unfinished business to the downside today–but if we don’t get another selloff today then we could get lower lows next week for reasons I will explain below.  If I am right, there probably aren’t a lot of bears from yesterday (especially above 2457) and there are some bulls who might be ready to sell if they break even, so the pro’s limited upside payoff for forced buyers could minimize the power of the bounce.  We will just have to see how that goes as the day proceeds.

FYI: initial targets for confirmed spotters are usually the bottom of the price channel envelopes, as explained below.  We obviously have the short-term and now intermediate minimums met.  (For those interested, the current long-term minimum pullback line is way down at 2342.25)

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Note: The following rant is meant for hard-core analysis geeks.  For those who just want the bottom line for today, you might want to skip this part and jump to the end!

<analysis rant/>

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ES 21-Day Range Envelope - Daily Bar
ES 21-Day Range Envelope – Daily Bar

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Tip: the pros don’t use moving averages (and neither should you) for algorithmic trading.  Those are lagging indicators and very imprecise.  Structural pivots, however, are places where major momentum reversals occurred and the price is precise to the penny and exactly the same for all players.  That is what the pros use and is the basis of how Stops and Targets works.

There are lots of new readers here who might not understand fully how Stops and Targets calculates the stop/reverse lines for each timeframe.  The core logic is built around detecting structural pivot lows and highs for weekly (short-term), monthly (intermediate), and quarterly (long-term) timeframes.  Those are the dominant cycles that drive the broad market and primarily are caused by options, earnings, and annual budgeting activity.

Many people have a hard time envisioning how those lines are derived, so I have prepared a visual aid on the chart above.  The green and red lines define a trading envelope for the intermediate timeframe.  Simply stated, the lines represent the highest high (red) and lowest low (green) of price for the preceding month of trading.

Take a look at the chart above and notice how you see higher highs and higher lows in a bullish trend since the election last November.  Price tends to hug the upper band as the market advances, which constantly pushes the upper band higher.  On the other side–look at how the lower band is pulled up as time goes by.  It is not until or unless price retreats back to penetrate that lower band that a new higher pivot low can be formed, which is the basis for Stops and Targets’ stop/reverse line algorithm.  You will also notice that in a strongly trending bull market a touch of that lower band after a pullback from the top band is a buy.

…and guess what today’s low did?  Yep, you got it…it poked through the lower band of a bullish trending market.  So logically, we should see a bounce here to move away from the band.  If it breaks under and begins to push the bottom band lower while pulling down on the top–well, that’s the start of the opposite (a bearish trend) of what I explained above.  Hopefully that visual helps when you are looking at the Stop/Reverse lines in Stops and Targets.

One last point.  A structural pivot low is only confirmed when there is one month of higher lows to the left of the pivot and then one month of higher lows to the right of the pivot.  Stops and Targets will move the stop/reverse line only on a confirmation, which is why the intermediate stop/reverse line for ES is currently located at 2315.50 because that was the last confirmed higher pivot low in the current trend.  Price has advanced quite a bit since that last higher pivot low on 3/27/17, so this current pullback has been overdue (in my opinion).  The reason I show the price channel on the chart above is to explain how I ‘cheat a little’ in my analysis and try to anticipate where the market has to go (at a minimum) to create a potential new pivot.  I do this for all three timeframes in my analysis here.

Yeah, I know…after reading that now your head probably hurts a little.  Bear with me, there is one more layer on the onion to peel back for the current analysis…

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ES-Weekly Bars
ES-Weekly Bars

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The chart above is a zoomed in look at the weekly bars with a structural pivot channel superimposed.  This time the structural pivots are set to count four weekly bar pivots.  Take a close look at what happens every single time that the previous higher low has been breached.  Yep…perfect stop sweep/reversal buy signals almost every time.  So, naturally, I am interested to know what the minimum pullback target would be to build the next higher 4-bar pivot in the sequence.  For that to happen this week, we would need a minimum pullback to 2410.25.  That’s quite a ways down from here, not saying it can’t happen before the current weekly bar close today (extremely unlikely)–but it would be a LOT easier for the pros to create a minimum pullback next week, if they are so inclined–because starting Monday the lowest low of the last four weekly bars will rise to whatever this week’s low happens to end up (currently 2430.25 as I type).  So, if I were pulling the levers and wanted to create a new higher structural pivot low I think I might wait to do it next week (or later) when the task is much simpler.

The weekly chart above perfectly illustrates the higher high/higher low trending paradigm that has been in play since the 2009 bottom.  This chart is our ‘roadmap’.  The paradigm will continue until we finally see a move below the last 4-bar higher pivot low that is unable to reverse back above that low.  At that point the market will begin building lower lows and lower highs and the paradigm will change from bullish to bearish.  The current hard deck for the paradigm in place since 2009 is at 2315.50

</analysis rant>

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So, Cliff’s note version of the current setup is this…

The minimum pullback target for the intermediate timeframe was met on a poke under 2439.  Let’s use the current day’s low of 2430.25 as an intraday bull/bear line going forward.  Price action is bullish above but would revert back to bearish below.  Upside resistance targets are shown on the hourly bar chart at the top of this page.

…my .02

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Top Spotters

Signals Matrix Summary 8-8-2017
Signals Matrix Summary 8-8-2017

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Spotter Signals 8-8-2017
Spotter Signals 8-8-2017

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At the close yesterday multiple new Top Spotter alert signals were generated across the indexes and index future options.  Every major index/index futures option except for the Russell 3000 now has spotter alerts in place.

The number of new Top Spotter alerts in the Russell 3000 was just 149, however, which is below the typical number that we see at a major top–so keep that in mind.  However, there are 733 confirmed spotters already in place so this could be a bit more stealthy setup if it confirms.  To see all of the currently active Top Spotter signals sorted by last signal date click here (link will open a new browser window):

https://stopsandtargets.com/members/signals/spotter.php?param=TS

If you keep an eye on those signals today to see how many are either confirmed or invalidated then you can get an idea of the strength of the overall market.  That is a great link to check regularly, by the way.  It shows spotter signals clustered by date.

Even better links to watch are the cumulative CONFIRMED Spotters (blue links at the bottom of the columns on the Spotter Signals page shown in the image above).  These show the new trend leaders after a reversal:

Confirmed Bottom Spotters: All Confirmed Bottom Spotter BUY Signals

Confirmed Top Spotters: All Confirmed Top Spotter SELL Signals

Spotter aficionados can glean much from the two links above–such as looking at which dates produced clusters of spotters and which symbols are leading the charge.

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S&P 500 Futures Summary Tab
S&P 500 Futures Summary Tab

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As always, Spotter Signals have two parts…the initial alert, and then a confirmation (or invalidation) on a subsequent day.  The alerts are only intended to provide a ‘head’s up’ of potential exhaustion of the current trend.  If those alerts are later confirmed the usual first target of the counter-trend move is the nearest stop/reverse line (shown on the summary tab of each analysis page).

On the screen capture for the S&P 500 Futures from Stops and Targets above, you can see that a confirmation for the new spotter signal would be a close under 2467.50.  The spotter signal would be invalidated on a move above the spotter signal bar high yesterday of 2488.50

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S&P 500 Futures hourly bars 8-9-2017
S&P 500 Futures hourly bars 8-9-2017

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The chart above shows the current configuration of the S&P 500 Futures on 60-minute bars.  The yellow shaded rectangle shows the short-term trading range (based on 5-day pivots) and the gray shaded rectangle shows the very-short term trading range (2 day pivots).

I have drawn in a tentative spotter pullback channel (dotted magenta lines) and have indicated the confirmation line at 2467.50

As I pointed out in my previous post–the key line to watch on ES is 2457.  That is the current short-term stop/reverse line from Stops and Targets and a move under that line would be the place where sellers begin to come in as the protective profit stops of pros begin to get stopped out–and if price does not recover immediately (stop sweep/reversal) that could trigger black box sell programs.

Two things to keep in mind here are the relatively low number of Russell 3000 spotter signals and also the propensity for the pros to trigger stop sweep/reversal plays under key support.

So, the bull/bear line for today is 2457.  Price action remains short-term bullish above but reverts to short-term bearish below.  If 2457 is broken and then we see acceleration to the downside and 2457 is not retaken after a stop sweep then next downside targets would be 2451.50, then 2447.50, and the bottom of that support cluster is at 2445.  If that support cluster fails to stop a decline the next target would be the bottom rail of the magenta spotter channel and possibly a retest of the trendline resistance breakout from 7/14 at ES 2437

To the upside, there is an open breakaway gap at 2471.25 that could get filled on an early bounce.  If price goes there then watch the reaction immediately after that gap is filled for clues.

So, this could be a potentially interesting day ahead as we watch to see what happens right here around the key short-term stop reverse line at 2457

…my .02

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S&P 500 Futures Update

Stops and Targets ES Short-term
Stops and Targets ES Short-term

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Stops and Targets ES Summary
Stops and Targets ES Summary

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The last time we had a structural change to the S&P 500 Futures was way back on June 29th when a new short-term pivot low was added at 2402.25 to kick off the stop sweep/reversal underneath the old short-term stop reverse line at 2412.50.  Yesterday at the close we finally got a new higher short-term pivot low (along with a new short-term pivot high).  The new short-term trading range for the S&P 500 Futures is now 2457 to 2480.50, which comes from the single day hi-lo range on 7/27.

So, you might be asking yourself…why does this matter?  The answer is that with the addition of the new short-term higher pivot low the market has finally eked ahead just enough to raise the stop/reverse line.  That higher stop/reverse line is used by savvy traders to lock in accrued profits on the long side.  Be aware that a drop under that line would be the first sell signal for many pros for the last leg up from 2402.25.

The short-term range has been tightly compressed since 7/27, and we all know what typically happens to a market after compression…range expansion, of course.

If my hunch is correct, today might be a very good time for everyone to review their protective stop strategies to lock in accrued profits.  The odds favor up from here–but a move under 2457 in the coming week would likely bring out the sellers.

…my .02

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