ES Update

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(click image to enlarge chart)

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Yesterday, ES closed below the top spotter confirmation line at 1354.75–as did 251 individual equity symbols (see Signals Matrix spotter report).

Now ES is ‘between a rock and a hard place’ as we await the next push. Under 1354.75 and the market is vulnerable to a quick drop at any time–but it wouldn’t take much of a futures-led jam to reverse the current spotter setup from present levels.

I have drawn in a shaded area between 1345.75 and 1358.50 that represents yesterday’s daily bar hi-lo range. To set up a bearish trending sequence of lower highs/lower lows, one would expect the top of the shaded range to hold and the bottom not. For today, wherever the ES trades outside of yesterday’s bar shadow can give an idea of which side is winning the tug-o-war.

For bears to seize the momentum, ES will need to trade under 1327, which would break the ST trend channel structure, flip the ST trend, as well as triggering the bull stops under last week’s low.

This is the best setup bears have had in a while and we’ll see what comes of it. All the requisites I was looking for have been met (capitulation squeeze > 1338, resistance target at 1372, and confirmed spotters).  However, as I explained yesterday, spotters can be tricky, and we need to see existing trending structures start to fail before sellers will begin to appear in sufficient numbers to break support on the way down.

ES top spotter hard stop is at 1373.50 and a single tick above that line would negate the setup. Intraday odds favor bears under 1354.75/ bulls above. With confirmed spotters in place, existing bullish positions should be protected with trailing stops per S&T and a wary eye should be cast  toward the market for sudden weakness.

Initial spotter target is always the closest primary trend line, in this case 1332.50 and that is the initial target lower.  If the spotter is eventually invalidated by a move above 1373.50– the continuation buy breakout would target the gap at 1392.50.

ES 1354.75 should continue to work as the intraday bull/bear line and the shaded range should indicate the momentum day traders’ triggers.

…my .02