In my last post I pointed out the contracting triangle (using green support and red resistance trend lines) just before the triangle breakout.
I also pointed out the higher low push sequence to watch for after the breakout to know when the foot comes off the gas for the pros. Two days after the breakout bar we got the last higher low at 2724.25 and there hasn’t been a higher low in the 11 trading sessions since.
That triangle breakout went into the buy stops (late bears covering and early momentum buyers) just above 2718.50 and then pros consolidated profits there from the stop sweep entry at 2591.25.
Overnight, we got a S&P 500 futures push back under the 2704.50 short-term range bottom. We also see the fledgling start of a possible opposite downward push sequence with lower highs the past two trading sessions.
So, having consecutive black bars with (so far) lower highs and lower lows–let’s talk about two possible outcomes in the very short-term…
If the pros continue to develop a lower high push sequence then bears would not want to see a move above the last lower high (currently 2731.75). If today ends up as a black bar then tomorrow professional bears will lower their trailing stops to the last lower high in the sequence (which would be today’s high barring an outside bar). The next target lower could be a ‘back-kiss’ of the descending trendline extension, which is currently at the 2670 area. That’s a tactic that the pros often use after a key breakout to shake off traders and to push them to the opposite side of their trades (creating sellers when they wish to buy). If that happens then watch for a bounce near the back-kiss. If we get a push down and the back-kiss bounce doesn’t develop, then the next target lower would be way down at the stops under 2591 (and a possible support trendline touch)–but we’ll likely know when the pros are done pushing when the lower high sequence stops.
If, on the other hand, a previous bar’s last lower high is broken either today (currently that last lower high is at 2731.75) or at any time later in a sequence then bears will cover and reverse. So, maybe something is brewing here–or maybe nothing, but those are the signs to watch for as we continue to track the aftermath of the contracting triangle breakout and to decipher the pro’s push intervention.
Price continues to be rangebound in the long-term (2552 to 2807.25) and intermediate (2591.25 to 2741.75) timeframes–but we would have a bearish downside breakout under 2704.50 in the short-term (or, conversely, a bullish range breakout above 2741.75 if this fledgling push down reverses after a simple stop sweep under the short-term range bottom).
Bottom line… under 2704.50, watch to see if a lower high push pattern develops. If so, then next watch for a possible back-kiss of the resistance trendline extension–if we get there. Above 2704.50, means the post-holiday futures were pushed lower to create a simple stop sweep under the bottom of the short-term range bottom. Buyers will likely come in on a move above the last lower high (and especially on an upside IT/ST range breakout above 2741.75).