Quadruple Witching Day and Monthly Outside Bar Study

Today is quarterly ‘Quadruple Witching Day’ when equity options and futures, and index options and futures all expire on the same day.  As is often the case, the market has been wild leading up to expiration as the pros undoubtedly look to maximize their leveraged gains, while minimizing the gains (and maximizing the losses) of those unfortunate souls sitting on the other side of their positions.

In a previous Big Picture post, I mentioned that the monthly bar structure was bearish at the time, with a lower high and lower low, and I commented that the odds favored the month (June) staying that way.  The reason I wrote that without much hesitation at the time was because we had just seen an outside bar on the May monthly bar, and as I will explain below the odds greatly favored my assumption.

An outside bar is when both the high and the low range exceeds the range of the previous bar.  For example, The April monthly high was 2960.50 and the May high was 2965.25.  The April monthly bar low was 2848.50 and May low was 2754.


Professional traders HATE outside bars in any timeframe.  Why, you might ask?  Because nearly every trading strategy is challenged under such circumstances.

Let’s take the May bar for example:

The first victims were the bears.  At a new all-time high, there was not one single bear on the planet with a profitable position on ES.  The bears had been squeezed into total capitulation.

Once a pullback started, many bears were likely initially afraid to chance a counter-trend move down from the top.  Note here that Stops and Targets nailed that start down with a Top Spotter and a counter-trend sell on the range envelopes.  Those without S&T, or those without trust in the signal would have found it very difficult to engage psychologically at that point.  The pros are great at beating people up who are right on an idea but early in implementation.

Next to be abused were the momentum breakout buyers who were overrun on the quick move down.  Those who didn’t cough up positions that may have been in the green at the previous close–but bright red (especially after a gap down open on individual equities)–often paid a terrible price.

Then next came the range traders who bought the dip to support.  They also got a big surprise to the downside, just like the momentum guys.

Following next were the bullish trend followers who saw big paper gains evaporate when their trailing profit stops were activated.  Fortunately for many they still had profits from diligently moving the stops higher to lock in gains.  Still, it is never fun to watch the numbers dwindle–even when it is a net gain at the end.

Those bulls who hung on expecting a bounce that didn’t come when they expected it, watched profits turn to losses–sometimes BIG profits turn into BIG losses if they failed to react in time.  Many of them ultimately succumbed to the intense squeeze pressure to the downside when the losses reached the ‘uncle (or max pain)’ point.

Then the tables suddenly switched and in reverse order the bearish breakout sellers saw their position reversed and the winners to the downside suddenly had the exact same thing happen to them as their bullish counterparts.  Bearish winners turned to losers and the upside squeeze has been intense ever since.

Often, the ONLY traders who do well in an outside bar are the countertrend traders who buy the stop sweep/reversals and then target the other side of the range.  Note that Stops and Targets signaled every one of those counter-trend entries.

Summation:  Outside bars suck for just about everyone–but the stop/reverse lines at Stops and Targets can help to override the powerful instinct to fight against what is happening, but only if you let them.

Outside bars work against every logical human instinct and my guess is there are a few heads nodding in agreement out there right about now.  If you’ve had a tough month (or two) in the market–don’t feel too bad about it.  You likely have a lot of company out there.  This is by far the toughest environment to trade in–and if you have done well then you should be very proud of yourself for a job well done.


So with all that said, let’s dig a little more deeply into the monthly outside bars phenomenon on the S&P 500 Futures…



Outside monthly bars are by themselves relatively rare on the S&P 500 Futures.  In the entire history of the contract, dating back to its inception 1999, there have been only 29 outside monthly bars out of 240 total months.

Note that more often than not, an outside bar favors the direction away from the stop sweep/reversal.

I have marked all outside bars with blue dots on the chart above.  The last time we had one was was back in November of 2016 (US Presidential Election month).  So, the appearance in May of an outside bar was certainly a long time in coming.  It is/was a noteworthy event and definitely worth pondering going forward as i will explain below.




As I type, however, the June monthly bar just did something VERY RARE INDEED!  We now have a June bar range that exceeds the May bar high and low… so we have just experienced back-to-back outside bars on the monthly S&P 500 Futures contract!

How rare is this you ask?  …well, so rare that it has only happened once before in the entire history of the contract (240 total months)…

The chart above shows the only other previous occurrence of back-to-back monthly bars on the S&P 500 Futures.  It happened way back in June and July of 2007.

In what might be worth considering–that double outside bar happened near the end of a blow-off top during the Bush administration rally that had been underway since the 2002 bottom (eventual stabilization after the 9-11 terrorism attacks against America).

After the pros finished distributing and repositioning in 2007, they absolutely drove the market into the ground to prepare the stage (in my opinion) for the unveiling and the intentional installation of their ultimate global socialist stooge, and the worst president this country has ever had.  (Too harsh, I briefly ponder to myself?  Nah, run with it, I decide…)


Warning:  those with delicate social sensibilities might want to skip the rant section that follows…  🙂



In what is somewhat reminiscent of the bathroom scene from the movie  Trading Places where the scheming brothers had a one dollar bet that they could take the lowest human they could find and make him look successful… and furthermore in what perhaps was the biggest FU to average American citizens of all time, the globalists hand-picked a truly repulsive and imminently unqualified individual, whose name was eerily similar to the most hated man of the time (Osama Bin Laden) and they made him President using the immense (at the time) power of their captive globalist media.

Had there been no President Obama, there never would have been a President Trump.  And such will be a similar ultimate real-life consequence for the arrogant globalists, one hopes, as it was for the brothers in that movie.


The election of Donald Trump in 2016 was the average American’s giant FU right back to the globalists… who clearly, were absolutely stunned and enraged at the devastating and previously unforeseen threat to their global dictatorship fantasies (and also fearing looming future incarceration perhaps).

Obama wasn’t alone in his audacious betrayal of America.  The list of perps is long and absolutely includes (in my opinion) the invisible hand that guides the markets.  Those folks have everything to lose if their globalist scheme to subjugate and destroy everything America stands for ultimately fails.

Those globalist folks absolutely loathe and fear President Donald Trump–and so it wouldn’t surprise me one bit if the powers that steer the market ultimately try to implement the same market beatdown tactic on President Trump sometime in advance of the upcoming 2018 Elections.

The giant multi-national corporations that have run the show (into the ground) are the sworn enemy of economic nationalism.  They absolutely must defeat what Trump stands for in order to restore their plan.  His biggest current bragging right is American prosperity as a result of globalism’s dramatic retreat under his common-sense policies.  They have tried everything in their bag of tricks to stop him, but have failed miserably, so far.  They NEED the American economic prosperity to be upended–but Trump has skillfully boxed them in by taking away many of the weapons previously used to undermine American workers and American industry.  Now, either they invest in American prosperity or pay the stiff tariffs to finance their opposition.

It is an absolutely brilliant strategy.  I think President Trump is giving the globalists an opportunity to join the party–and those who do will ultimately prosper, but those who don’t will suffer greatly.  Ask the Chinese how they are enjoying bearing the brunt of the economic consequences.  Other countries and companies are carefully watching to see the outcome of this epic battle.

So, do you think with all that is at stake (trillions of dollars) there isn’t a real risk that we will see a last desperate effort to upend Trump’s major campaign centerpiece (the economy)?

Just a theory, of course, but something to continue to be watchful for.  As always, Stops and Targets will provide the signals–we just have to be cognizant that if/when that time comes.  It likely won’t ‘feel’ right to initiate the trades and to honor the stops.  That’s what the past two months has given us a little taste for.



The double outside bar phenomenon of the past two months has been a great opportunity to critically self-evaluate trading discipline and technique.

My own personal suggestion is to trust the Stops and Targets stop/reverse lines when the going gets tough.  Stops and Targets doesn’t ever ‘feel’ anything.  It’s purely logical, and a great tool and trusted second opinion guide to have–especially when the pressure is on.  If the Stops and Targets analysis isn’t agreeing with what you might be ‘feeling’ at the time, then seriously consider reevaluating the trade.  It’s all there in the various S&T signals–trending, counter-trend, range trading, etc., with helpful risk management suggestions.

Have a great weekend everyone!

…my .02




Options Rollover Day

Futures Options have now rolled over from the June 2019 to September 2019 contract with a difference of +4 points from ESM19 (June) to ESU19 (September).

All previous chart numbers have been adjusted to reflect the new contract pricing—so, for example, the Long Term stop/reverse line from the expiring June contract at 2844.50 now becomes 2848.50, and so forth.








Market Update

In my last post I concluded with an observation that the market was looking a little precarious after a Top Spotter was generated on May 1st in conjunction with a double top from September of 2018.  Price action has been mostly down since the Top Spotter confirmation sell kicked in at 2916.

So, let’s take another look at the market configuration here, comparing Stops and Targets with my charts in three timeframes…



The screen capture above shows the S&P 500 Futures Options analysis page from Stops and Targets.  My eyes start at the chart on the right and what I see is a short-term rally in a long-term bearish market.  I say that because the bottom stop/reverse line at 2763.75  is green and the top stop/reverse line at 2844.50 is red.  The bottom line represents short-term (ST) and the top line represents long-term (LT).

I then read the analysis and it confirms my initial impression.  This is a BULL 1 multitrend configuration (short-term rally in a long-term bear) with short-term resistance next coming at the IT stop/reverse line at 2841.25.


Let’s take a look at my charts next to see how those numbers were calculated, and maybe get a little deeper insight on the Big Picture…



The monthly bar chart above represents the long-term timeframe…

The very long-term bullish trend is certainly intact, as shown by the rising green trendline since the 2009 bottom–but we currently have a long-term pullback underway.

How do I know this is a pullback, you might ask?  The answer is found by comparing the current bar (June) high/low range to the previous month (May) bar high/low range.  So far, we have a lower high and lower low relative to last month–so long-term price action remains bearish until/unless we see a breakout above the previous bar high to resume the very long term bullish move.  It is unlikely that we will see that happen this month due to the length of the prior bar.  That’s not to say it can’t or won’t happen–but current odds suggest it is unlikely, especially while price trades below the long-term stop/reverse line, which is currently at 2844.50.

So, the next question one might ask is ‘what determines that stop/reverse line?’, to which I would reply ‘excellent question!’ and then proceed to explain…

Many times here I have repeated my definition of a bullish trend as ‘a series of higher highs and higher lows’ and a bearish trend as ‘a series of lower highs and lower lows’.  So let’s apply that definition to the current bar and the previous bar…

Last month we saw a break under the series of higher lows from the previous 4-month bullish trend sequence (higher highs and higher lows).  That break below the last higher monthly bar low came at 2844.50.  At that exact point, Stops and Targets generated a long-term sell signal.  See how that works?

That trend change line became the long-term stop/reverse line.  It won’t move again until a new trending sequence starts–either a lower high (bearish) or a higher low (bullish).  Since we already have a lower low, we can’t have a new bullish trending sequence start this month, unless price were to break above last month’s high.  We could, however, still see the stop/reverse line move lower at the end of the month (still a long way away) but only if the June high remains below the stop/reverse line.  There is lots of trading action yet to come, so we’ll have to wait and see how it goes–but so long as the current monthly bar high remains below the stop/reverse line the bears have the statistical advantage.

One last point on the stop/reverse line.  If price is trading inside of the previous bar on the chart–we have a ‘rangebound’ market.  that is what Stops and Targets is saying with the sideways arrow next to the long-term trend on the range envelopes section.  The red color of the arrow lets us know that it is current rangebound… but with a bearish bias under the stop/reverse line.


One last thing to point out at Stops and Targets’ range envelope section…

Do you see how the long-term lower envelope number at 2750.00 is colored green?  That lets you know that a bullish range envelope signal occurred there.  In this case, it was a counter-trend buy signal, which is analyzed in detail on the long-term tab…


… the long-term range bottom rally signal was generated when price dipped below that range (to a new current bar low of 2744.00) and then crossed back above the previous month low at 2750.00.

Note that it was a great warning signal for a potential short squeeze rally start.  Note also that the upside counter-trend target is the stop/reverse line at 2844.50

All of that jives perfectly with my chart analysis.  Pretty cool, right?


Next, let’s move to the intermediate timeframe…




Each bar on the chart above represents one week of trading.  The intermediate timeframe at Stops and Targets is based upon weekly bars.

What I see is five consecutive weeks of lower highs.  Clearly, the trend here is bearish and since the previous bar’s high was lower than the previous location of the stop/reverse line, that line has moved lower to follow the trend and to designate the precise point where, if crossed, the intermediate bearish trend would reverse.

Last week’s bar high was 2841.25 and if you refer back to the Stops and Targets screen capture at the top of this post you will see that is exactly where the IT stop/reverse line is currently located.

Also, if you look at the range envelopes section you will see a red down arrow , which indicates a trending intermediate bearish market (lower weekly highs along with a descending stop/reverse line).

Same deal here as for the long-term regarding a bullish rally in a bearish trend.  We would need to see a new higher weekly high to reverse the intermediate trend.  Note that professional traders will typically trail protective stops at the stop/reverse line to lock in profits from a trending move.

It is usually best not to be long below a stop/reverse line in that particular timeframe.

Intermediate bears are fine below that line, but would begin to cover and reverse on a move above.


Last, let’s take a look at the short-term timeframe…



The short-term timeframe at Stops and Targets is based on daily bars.  The current daily bar (June 5) shows a higher high and higher low so far today.  That is the second bar in a sequence to a higher low and higher high yesterday… that is a bullish trend.

You can see that the last lower high in the previous bearish sequence was at 2763.75.  When price crossed above that line it also crossed the short-term stop/reverse line and became a buy-to-cover signal for short-term bears and a simultaneous buy signal for short-term bulls.  See how that works?

If today’s low finishes above the short-term stop/reverse line then that line will move higher (to today’s higher low) after the close to protect and lock in bullish profits.  If/when that line is crossed below, then it would be time for smart short-term trend-following bulls to sell–and the door would open again for bears to rejoin the downtrend after the short squeeze runs out of momentum.

I have added a screen capture from Stops and targets above to show where/when those short-term signals were generated…

The short-term trend started at the stop/reverse line cross of 2763.75 on June 4 and has advanced +49.25 at the time of this writing.

Note that the next upside target is 2841.25, but also note that target (intermediate stop/reverse line) may not be hit if we continue to see a sequence of lower weekly highs on the chart.  All signals have to be taken in context with the next higher timeframe.

This bullish rally is very nice (if you are not a bear being squeezed, that is) but it still has some work to do to reverse the larger context bearish structure that is currently in place.

So long as the daily bars continue to build higher lows, it’s all good for bulls here–but look out below if that short-term stop/reverse line fails to hold on a pullback.  Especially if we eventually see lower highs form on the weekly and monthly bars.

All bullish reversals start in the short-term timeframe, of course, and must ultimately challenge and then overcome bearish resistance from the higher timeframes.  Let’s see what happens next if/when price gets to the intermediate stop/reverse line.

Ideally, I would love to see (or have seen) a huge trove of Bottom Spotter signals mark a solid reversal bottom–but this current pullback from May 1st started from a Top Spotter configuration, that was actually a sneaky double-top with a nasty outside bar on the monthly and daily bars–followed by a big gap down open on May 10th.  That was most likely the pros doing their thing to trap and exploit bulls after earnings season and the annual Russell Reconstitution was complete.

Not sure this feels like anything terribly more than pocket-picking at this point by the pros, but we’ll have to wait and see how the structure I pointed out above unfolds going forward.

It’s all good for short-term bulls above the stop/reverse line at 2763.75 –but a sell-off move underneath today’s current low at 2801 would bring higher timeframe sellers back in.

The intermediate stop/reverse line is very important going forward.  LT/IT bears don’t want to see that line broken to the upside–but ST bulls are salivating at the prospect of pushing into the trove of buy-to-cover stops above those stop/reverse lines that are following those trends lower.

Just like the Stops and Targets summary chart shows… it’s currently all about 2763.75 below (2801.00 if today’s current low holds into the close) for ST bulls, and 2841.25 above for IT and LT bears.

…that’s my .02