Market Update

 

click image to enlarge

 

In my last post I pointed out the preliminary indications that some weakness could be coming.  On June 12 all three timeframes touched their respective range channel tops and then on the next day we got a Top Spotter alert at 2796.  The index/futures spotters weren’t unanimous and individual equity numbers were not in the strength we would expect to see at a major reversal–but the numbers were elevated enough to give a warning.  Today we are seeing a touch of confirmed support at 2745 and that would have been the first target for professional bears who entered short on a break below the last higher low when the upward push ended at 2782.25.  Their initial stop would have been at 2796 and if today’s high were to finish below 2782.25 then tomorrow the trailing stops for the bearish pros will be moved down to today’s high (currently 2780.25).  The pros like to work in push moves, so the trick is to watch the lower highs on the way down (and the higher lows on the way up) for reversal confirmation.

In a macro analysis this market continues to trade sideways/up inside the 1/29 to 2/6 pullback (2860.25 to 2537.75).  It has been steadily working its way back toward the descending range envelope top lines with a touch for all three simultaneously finally coming at 2796.  Not surprising at all to see profit taken at the first contact with the long-term top rail.

So, for today–let’s first see how short-term confirmed support holds up at 2745.  If that breaks then next major target lower is an open gap at 2709.25 and then if things get really ugly we would look for an eventual move to the bottom of the intermediate range envelope (currently at 2678.75).  If, on the other hand, we see a rally that crosses back above yesterday’s low at 2761.25 that would generate a counter-trend buy signal and would likely be a good place for bears to cover.  Keep an eye on the short-term range envelope for that eventual counter-trend buy signal.

…my .02

 

 

Futures Options Rollover

Futures Options have rolled over from the June 2018 to September 2018 futures contract with a difference of +3.75 points from ESM18 (June) to ESU18 (September).

All previous chart numbers have been adjusted to reflect the new contract pricing—so, for example, the Bottom Spotter from the expiring March contract at 2534 now becomes 2537.75, and so forth.

 

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click on image to enlarge

 

In my last post I pointed out the potential for a backtest of the triangle breakout (see descending red trendline extension on chart above).  The chart above shows how that move perfectly unfolded and the ensuing rally push from that stop-running setup by the pros.

Yesterday we got intermediate and short-term range envelope counter-trend pullback warnings at 2783.50 (see ‘range envelopes’ section on stopsandtargets.com screen capture).

Also, note that the 7-day ‘consecutive-higher-lows push pattern’ has been interrupted by today’s dip under 2763.75 (dotted blue line drawn on chart above).  That line can serve as a bull/bear line today for very short-term traders.  Sellers will come in underneath yesterday’s low and professional bears will use yesterday’s high as a trailing stop on a counter-trend speculation.  If a downward move develops from here the next target lower would be the bottom of the short-term range envelope.  A move above yesterday’s high (at 2783.50) would negate the setup and bring in buyers (mostly bears covering).

There were also 340 new top spotters yesterday, which gently raises an eyebrow and points out possible vulnerability to the downside.  That is an elevated but not huge number of spotters (like we would expect to see at a major turn)–and we only had two index spotters: on NQ (NASDAQ 100 Futures) and COMPX (NASDAQ Composite Index), so just a small head’s up here as we watch to see how price resolves away from yesterday’s low breach and break of the 7-day higher low push pattern at 2763.75.

…my .02