Market Update

 

 

Price action continues to be trapped inside three embedded trading ranges… the big one (long-term range) being defined by the Intermediate pullback from 2883.50 to 2534 occurring between January 29th to February 6th.

Let’s take a quick peek at the range envelopes data on the S&P 500 Futures analysis screen capture above from Stops and Targets

The original long-term sell signal was at 2883.50 on 29-Jan-18.  The most recent intermediate signal was a counter-trend buy at 2552.00 on 03-Apr-18 and the most recent short-term signal was a counter-trend buy yesterday at 2611.25Note:  The dates come from the ‘last range signal’ column and the signals come from the color of either the ‘range envelopes’ bottom or top.

Current momentum should be up for a bit if the price can get by the short-term stop/reverse line resistance here at 2659.75.  Next target above would be the top of the intermediate range, which is currently at 2718.50 and is where the last short-term push was turned back.

Otherwise, sellers would reappear on a break under 2611.25.

 

 

 

Hard deck for our Weekly Bar Paradigm remains at 2534.  It’s been a while (Election day in 2016 to be precise) since the pros engineered a major stop sweep/reversal move (point 9 on the chart above).  If that is the eventual plan, then we know exactly where the pros would need to go to scare up sellers (a huge number of stops are bunched up under 2534).

There is a triangle forming using resistance (red) and support (green) trendlines during this consolidation phase.  Eventually, we’ll get a triangle breakout from this incredibly boring contracting trading range.

But, first things first and right now (range-bound) momentum is up above 2611.25

…my .02

 

 

 

 

 

Market Update

 

Let’s start by checking in with Stops and Targets to see what it says about the S&P 500 Futures…

Note that yesterday there was a counter-trend sell signal at 2718.50 (see orange arrow on range envelopes on the screen capture above).  Also note that price correlates with resistance at the intermediate stop/reverse line at 2713.50.  The BULL 8 setup is explained nicely in the orange highlighted area.

 

 

 

Let’s use my daily bar/range chart above to fine tune that analysis for the very short-term…

In my last post I pointed out the bullish push.  Note that until today there have been eight consecutive higher lows in the bullish push sequence.

Today we are seeing that sequence broken with a move under yesterday’s low at 2703.75 (see blue line on chart above).  That line is the ‘bull/bear’ line today.  Very short-term price action is bullish above and bearish below.

If we were to see a close today under that line then we start to watch for the opposite kind of push lower in the coming days, which would be a bearish series of lower highs.  The next major target lower would be the rising short-term range envelope bottom, which is currently at 2626.

If price were to break out above 2718.50 then the next target higher would be the descending top of the intermediate range envelope, which is currently at 2756.50

The key right here, though, is to watch what happens at 2703.75.  The reason that line is important is because bulls who have been riding the push higher for the past eight days are now selling here to lock in profits.

If this is just a shake-out move under 2703.75 then once sellers dry up, the pros will head higher with their new inventory.  If, on the other hand, this is the start of a larger move south then the pros will be looking to drive price down to find a spot to buy-to-cover.  To do that, they would need to create sellers for the other side of their trade.  See how that works?   😉

…my .02

 

 

 

 

 

 

Market Update

 

Let’s again take a peek at the ‘range envelopes’ data from Stops and Targets for the S&P 500 Futures Options…

Notice that the most recent ‘last range signal’ was yesterday at the close for the short-term timeframe.  In this case, the color of the short-term range top at 2687.00 is now bright green, which signifies an upside breakout.

 

 

 

It has been awhile since we have seen escape velocity achieved on a rally to the top of the range.  Let’s see if this escape attempt can stick.  We can also see by looking at the dotted boundaries of the ST range on the chart above that a V is forming to show where the bearish downtrend reversed to bullish (at the CT Buy signal at 2552).

In my last post I pointed out the last daily bar lower high in the bearish sequence and the upside breakout there that flipped the momentum from bearish to bullish at 2618.75.  I have drawn that line in bright green on the chart above.  What happened after that reversal was a trip to the top of the channel and then a fake-out bar down from that channel resistance to shake off new bulls.  Once that shake-off was achieved, we see a perfect example of a bullish push by the pros that is detectable by a sequence of higher lows on the daily bars.  See it there in the last seven trading days?  …seven higher lows in a row.  That push traps bears and ensures guaranteed buyers are locked in exactly where I said they would be, which was the bear stops resting just above 2679.75.  Once the pros pushed price into that zone, they KNEW they had buyers waiting (covering bears).  How did they know they had buyers waiting there?  Take a big guess who loaned the bears the borrowed shares to sell short?  Guess who also wrote the put options (and immediately bought offsetting calls)?  Yep, the pros… the glorious apex predators at the top of the food chain of the market.

So, as always, I love it when a plan comes together.  Now we have to see if the pros intend to take it higher from here, or if they will again drive it back down once the cover-buying bears are exhausted.  One thing we do know is that the pros are almost certainly trailing stops behind those advancing higher lows and if you are long with them–then you probably should be too.  😉

Yesterday’s low was 2660.75.  It’s all good above that line for bulls in the short-term, but any subsequent move below the last higher low (to break the push sequence) would bring the bears back in.  See how that works?

Happy Tax Day

…my .02

 

 

 

 

 

Market Update

 

Take a peek at the screen capture above from Stops and Targets for the S&P 500 Futures symbol ‘ES’ and concentrate on the ‘range envelopes’ data at the top center of the analysis page.

Using the ‘last range signal’ dates lets start from the oldest signal and then work towards the newest…

On 29-Jan-18 the market generated a counter-trend pullback signal at 2883.50–that pullback went to 2534 and set up the long-term trading range, inside which the market continues to meander.

On 03-Apr-18 we got counter-trend rally signals on both the intermediate and short-term at 2552.

Looking at the arrows to the left of the range envelopes we see a mixed bag there…

The sideways green arrow next to the long-term range indicates a trading range with a bullish bias (above the long-term stop/reverse line at 2563.25).

The sideways red arrow next to the intermediate range indicates a trading range with a bearish bias (under the intermediate stop reverse line at 2713.50).

The downward red arrow next to the short-term range indicates a bearish trend in that timeframe (under the short-term stop/reverse line at 2679.75).

All-in-all, it’s a pretty messy market here as we await an eventual escape from this long-term consolidation after the significant technical damage inflicted between 30-Jan-18 and 06-Feb-18.

The major takeaway from the analysis above is that the hard deck for bulls is at 2534.  Knowing that…where do you think the pros would love to go to begin cashing out on the short positions they undoubtedly hold?   Yep, the bull stops are currently all bunched up underneath that line.  If the price is forced under 2534–all hell would break loose on volume as disciplined traders are forced to sell.  None of that is lost on the pros and that is the absolute essence of the weekly bar stop sweep/reversal paradigm that has been in place since 2009.

If we get a push under that line, I will lay out the setup to test that paradigm for what would be the 10th time since 2009.

Remember the paradigm rules…  if price were to break below that line at 2534 and then recover back above after the stops are swept–then we could have another outstanding buying opportunity.  If, on the other hand, price were to break under that hard deck at 2534 and then was unable to break back above and hold then the paradigm would end and the bears would be unleashed.

None of that matters here, however, if the current counter-trend rally from 2552 catches a toe-hold and breaks out of the short-term bearish trend.  The first signs of that are here–but we have all been conditioned at this point to expect another smack-down.

Let’s take a look at the chart below to see how this setup can be played from here…

 

 

 

click image to enlarge

 

 

 

On the chart above we can see all the same information from Stops and Targets displayed–but I want to point out a few other subtleties…

On the chart above I have labeled the major signal areas starting from the top at 2883.50, then the IT buy at 2534, followed by the short-term range pullback followed by a rally at the red and green arrows, then the counter-trend sell at 2807.25 intermediate range top, followed by short-term and intermediate sell signals, and then the CT buy at 2552 that corresponded to a Long-term support bounce off 2563.25.

Now, let’s take a look at the subtle stuff since 2552…

Savvy traders look for a breakout above the last lower high in a downtrend.  Why?  Because opposing traders who are riding winning trades (in this case bearish) tend to lock in profits by moving stops down with the lower highs.  Knowing that, take a look at the bars from the CT SELL signal at 2807.25… Imagine that you sold short right there.  Now imagine that each day you pushed your trailing profit stop lower using the previous day’s high.  That worked great for 5 days and then the pros swept the bear stops in a quick head fake before heading down for the next leg from 2713.50.  See how that works?  Standard operating procedure for the pros.  Happens over and over again in these breakaway moves.  The up-down-up-down shakeout move just before the bottom at 2552 is the pros baiting bears to first sell and then forcing them to buy to cover–which affords an excellent opportunity for the pros to exit positions under cover without moving the market against themselves.  The last plunge down to 2552 was the pros setting up a bargain-priced buying opportunity for themselves as bulls and bears both sold the break under 2591.

Now, with all that subterfuge behind us–the first tell for savvy traders was the breakout above the last lower daily high at 2618.75.  A move above started buying as bears cover.  Momentum buyers are in at that line trying to ride the pro’s algorithms.

The first obstacle is resistance right here at  2652.  If price can overcome that resistance this line becomes the first short-term counter-trend buy signal (see Stops and Targets also).  If that happens then guess where bullish traders will move their stops tomorrow?  Yep, that’s right they will move them to the last higher low, which would be today’s low at the close.  See how that works?

So, what would be the next target of this current pop if the rally can get past 2652?  The pros know that more bear stops are sitting above 2679.75.  If the pros push price to there, those bears will be forced to buy.  What a coincidence–the pros just happen to have some inventory accumulated lower that they will be happy to sell.  See how that works?  This game is predicated on baiting traders and then maneuvering them into taking the other side of the pros trades.  So, when you look at charts–set aside your feelings and instincts, but instead ask yourself always–where would a pro who is sitting on a perfect entry (because they always are) go next?

When the pros are ‘pushing a move’, you can usually tell by the consecutive higher lows when going up–and the consecutive lower highs when heading down (occasionally interrupted by a stop sweep head-fake to shake off other traders).  Try looking at your charts that way from now on and see if you can spot the ‘pushes’ yourself.

It’s very early in this short-term bullish move and the only trailing stop that makes sense currently for counter-trend bulls is at 2618.75.  That would change if today’s bar closes positive and the low at the close is higher.  Wash-rinse-repeat tomorrow until the last higher low gets broken to the downside.  Again, see how that works?

So, the bottom line here is that we are currently in a long-term trading range (with a bullish bias) so long as price stays above 2534.  If price were to fall below that ‘hard deck’ line, then we could see massive selling volume kick in as fear of the long-term bull market reversing would be prevalent.  If it goes back down there then we are going to get test #10 since 2009 of the Weekly Bar Paradigm and I will explain it all again if/when we get there.  For now, we are seeing the start of a fledging short-term rally.  First resistance is at 2652 then next are the bear stops resting above 2679.75.  The big unanswered question is whether the pros want to eventually kick open the trapdoor under 2534.  First clues will come by watching the short-term, as outlined in detail above.

…my .02

 

 

 

 

 

 

 

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