ES Update

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(click image to enlarge)

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Yesterday, the pros got the bear stops above 1288.50. Those stops congregated there as a result of twelve days of marginal lower highs and lower lows centered around the old range bottom at 1284.75. That was a stop sweep/reversal play, as anticipated, and sometimes those take a little while to play out. Bears were lulled into a false sense of security and the trap was sprung, which is textbook bear market rally action.

Bear stops represent guaranteed buyers, and are an easy layup for the pros who took the other side of the trades at lower prices and knew that ready buyers were available at a certain level. Much as a spider sometimes wraps its’ prey in a web to save for a later feast, that was the play of late.

The break above 1287 yesterday swung the weekly bar to a higher low/higher high (we haven’t had one of those since late April) and also sets the first potential new ST structural pivot at 1292.75

Confirmed resistance, and the Stops and Targets trending number is at 1295.50, and the top of the ST downtrend channel is just above, along with the intermediate primary trend line.

The confirmed bottom spotter has accomplished the initial objective, which was a touch of nearest primary trend line (ST). Sometimes the signal keeps going to the next objective (in this case IT), but until/unless all trends flip positive, a smart trader will start to watch for reversal points once a clear objective has been obtained (in this case the stops > 1288.50 and the weekly bar high).

Once we get a new local high established, it can take several trading days of range-bound price action to set the number, and wherever that high occurs, it will become very important going forward as either the next ST high in a continuing bear market–or as an eventual pivot reversal line for momentum traders if a ‘W’ bottom is being set.

Stops and Targets is setting up for a short-term trade around the primary trend line at 1287.75. Those primary trend lines are almost always volatility zones, and that makes sense ahead of the FOMC announcement later today. Bulls are going to need to demonstrate an ability to move past yesterday’s high to draw in more buyers, but we have significant resistance structures lurking just above.

my .02