The New Year has started off with a ‘bang‘ (in Baghdad).
Let’s take a look at the current broad market setup in multiple timeframes using the S&P 500 Futures as our proxy…
The news of the long overdue death of Iran’s top mischief-making general initially tanked the futures, but not before first taking out the early bear stops just above the all-time highs, of course. The pros usually seem to know in advance when something big is coming.
The current setup from Stops and Targets shows the poke just above yesterday’s highs, followed by a sharp decline that triggered a new Top Spotter signal and then bounced after taking out the bull stops under the intermediate stop/reverse line.
We’ll see what happens as the day goes on, but the major line in play today should be that intermediate support, which is currently at 3222.50
click image to enlarge chart
On the monthly bar chart above, you can clearly see what a great year 2019 was–after the bounce from the bottom edge of that trend channel at the close of 2018 (see green highlight).
Note that since the VLT (very long term) secular bear bottom in 2009, there have only been three major monthly buys at the rising bull channel bottom (see dashed lines on the chart above)–and once those channel bounce rallies get going, they have been very good up until the point where we start to see a lower high form on the monthly bars, and then the initial sell for the counter-trend pullback kicks in at the first break below a previous monthly bar low.
Since the current month (January 2020) is showing a higher high, it doesn’t seem to be setting up like major previous pullbacks–but I’ll be keeping an eye on what happens ahead now that the hornet’s nest has been kicked hard in the land of never-ending wars.
FYI: Professional bears will likely be using last month’s high at 3254 as a line for establishing counter-trend short trades. Major selling in this timeframe would not kick in until/unless we were to see a break under 3072.25, however. If we do see a pullback develop starting in the shorter timeframes and then cascading, the trove of trailing stops located under the previous monthly bar low (currently at 3072.25) would be the first major pullback target on the monthly bar chart.
So, bottom line here is just what Stops and Targets is saying in the long-term analysis tab… “last range envelope signal: range top counter-trend sell at 3254.00 TODAY”
The markets have been on an absolute tear since the last Weekly Bar Paradigm buy signal a little over a year ago (see point 10 on the weekly chart above), setting up three new weekly higher lows since December 2018.
It’s been awhile since we had a pullback deep enough to potentially challenge the last higher 4-bar pivot low, and that Weekly Bar Paradigm hard deck line is way down at 2857.75 at present.
The intermediate counter-trend sell signal at 3254 has already reached the initial target of 3222.50, and as I mentioned at the start of this post, that is the line currently in play. A new break below 3222.50, that does not recover, could target the bottom of the weekly bar channel, which is currently at 3072.25
It’s all about 3222.50 here. Price action is bullish above/bearish below.
And finally we come to the daily bar/range chart (see above), which has all three timeframes superimposed to show The Big Picture.
Bottom line here is still the major support line at 3222.50. If that support goes, then next target lower would be confirmed support (old resistance breakout) at 3160.75
Happy New Year!