ES Update

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(click image to enlarge chart)

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The chart above shows the ‘after’ picture from this morning’s post.

A whopping 500+ spotter signals was the unmistakable clue yesterday, and today we got confirmation across all indexes and a very large number of individual equities.

This morning, I mentioned 1207.50 as the intraday bull/bear line and it turned out to be an ideal entry on the short side…right at the confirmation line for the top spotter.

I usually am not a fan of countertrend trading, but the unusual circumstances this morning were such that it made sense to take a shot at that line.  For those who did, there are now nearly 30 ES points in the bank, allowing sufficient cushion to easily ride out any potential volatility around the primary trend line and remain profitable.

The pros took out multiple levels of support today in what no doubt a ‘shock and awe’ move for many (but not for Stops and Targets members).  As I type, price is hovering around a pivot low at 1179.  That line now serves the opposite function that 1210.50 did yesterday as an intrabar VST bull/bear line–and is the line in play here as we await the start of the overnight session (for the US).

The next bunch of bull stops lower is at 1171 and if they really get crazy over the coming sessions, then the next hard support below could be down near 1141, which is where the last trend breakout occurred (see ‘Trending > 1141.00’ on multitrend indicator just below Bear 1 Rating on analysis results page for ES).

The short-term trend is now down below 1189, and so the macro bias is now short here until/unless that line is crossed to the upside.

My guess is that most bears missed this move, and if so, the pros have a nice head start advantage here that they are not likely going to relinquish if this is a true break—but we’ll see if this stays under the primary trend line, or not.

Ideal short entry (in my opinion) was at 1207.50 (or at 1210.50 yesterday for very aggressive CT traders) with a stop now set at 1189.  ES 1179 is the line in play, and if it were to fail, then 1171 would be next.  Trying to buy the dips immediately after a fast break like this is generally futile—but if it is going to rally, then I would expect it to do so after a stop sweep under a recent pivot, with 1179 being the first opportunity.

Today was a very good example of how one can use the shorter time frame to set up a higher time frame trade.  In this case, the VST tactics worked to ride the ST change across the primary trend line.

No guarantees (there never are) what may happen next, but the pros definitely took out the short-term bull’s trailing stops today.  If you were patiently long in that timeframe from near the February lows, this was a nice payday on the long side, and with some luck and good skill was also an excellent trading opportunity to position on the right side of the primary trend line with a cushion of profit, should a snapback rally bring it back into play.

For those who locked in long profits and scaled in short at the above lines—or at least north of the trend break, then this was an excellent day indeed–with profits long and short possibly equaling or exceeding a near perfect buy/hold from the Feb lows even while patiently waiting for trend change confirmation.

As always, the trick is to come away from these primary trend line interactions on the right side of the trend.  Spotters certainly hint at more down to come, but that short-term PTL at 1189 is the deciding line and is the typical first target of a pullback  in a powerful uptrend, even with an overshoot…and that has been achieved

ES 1179 should be the VST line currently in play…countertrend bullish above/short-term bearish below.

ST trend is down <1189.  Next PTL lower is IT at 1154.

There is much to be learned about multitrend positional trading by studying a day like this carefully.  A guy who did this right, took gains patiently locked in from the last short-term trend and is presently sitting in a short trade with a locked-in profit cushion above the primary trend line.  Now we just wait and see where this trend goes, and do whatever it takes to stay on the right side of the primary trend line.  There is absolutely no difference in tactically trading the short side from the long, except that the snapback reactions are generally more violent.  A push up and through 1189 is an automatic stop/reversal, taking profits from the short entry.  Otherwise, the trend is followed away from the line as long as it goes, taking partials as you go, and pushing trailing stops behind the trade—never knowing beforehand whether it will be a quick reversal stop-out, or the start of a huge multi-month run.

The VST positional tactics you saw today can work just as well when using the ST to position for the IT, or the IT to position for the LT.  Great trade entries are tough…requiring much patience and skill–and so when a good one is made, it is important not to give up one’s position in the trend by guessing at countertrend targets (in my opinion).

It is all about 1179 and 1189 here in the short-term, and we’ll see how it goes overnight.

…my .02