At the closing bell on Friday there were 721 new Bottom Spotter alerts along with 23 Bottom Spotter confirmations. That is a large number and potentially significant. This is essentially the polar opposite of what we saw on January 16th with huge numbers of new Top Spotter alerts, which clued us in to the significant pullback that started on January 29th.
I won’t go into the nuances of Spotter Signals here, but for newer readers I strongly encourage reading the following help topic to fully understand what Spotters are and how they work: https://stopsandtargets.com/help/#collapseThirtythree
click on image to enlarge
In my last post I explained that this takedown has so far been an almost perfect example of predictive analysis using a combination of Range Envelopes and Spotter Signals. Take a look at the chart above and notice the cross under of the range envelope tops at the magenta colored down arrow. There were initially some buyers at the first touch of the short term range bottom (2825.50) but that gave away after two days and we saw a steep selloff that blew right through the intermediate range bottom (2708.50) and ultimately bounced at the long-term range envelope bottom (2558.25). We had new Spotter signals at both the top and bottom (if the current Bottom Spotter alerts hold).
Let’s cross-reference the previous chart with a screen capture of the summary analysis for the same symbol (S&P 500 Futures Option) and focus just on the highlighted table at the top. Note the dark red color on the range envelope high at 2878.50 dated 29-Jan-18. That was the initial counter-trend pullback alert. Next, note the dark green color on the short-term and intermediate term range envelope lows at 2529 dated 06-Feb-18.
At-a-glance that is read as: a long-term counter-trend pullback started at 2878.50 resolving to an intermediate (and short) term countertrend buy at 2529.
It doesn’t get any better than that when it comes to accuracy, so a big tip of the hat to the amazing algorithms at: https://stopsandtargets.com/
Now, with all that said, technically we are in a short-term bear market pullback to long-term support. The next resistance above comes at 2667.75 and then 2708.50 (intermediate stop/reverse line).
The new Bottom Spotter alert signal for the S&P 500 Futures will be confirmed on a bar daily close above 2699.75. That same Spotter alert would be invalidated on a move under 2529.
After today the short-term trend will officially start to trend bearish as the range envelope top passes under the stop/reverse line at 2825.50. The short-term stop/reverse line will then begin to move lower each day as the range top drags it down. So, the two range extremes to watch will be the long-term range envelope bottom at 2529 and the descending short-term range top (currently at 2831. The current trading range will hold price action until one side or the other is ultimately breached. See how that works?
Let’s see what the bulls can do with the ball here. The long-term bull market is perfectly healthy above 2529–but if we get a plunge back underneath then bears would be back in business after a very long hiatus.
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