ES Update

(click image to enlarge chart)

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1) The first chart above shows a weekly bar perspective of the continuous ES (S&P 500 Futures) contract looking back over a decade in time.  This chart illustrates one way of looking at a very long term (VLT) perspective.

The VLT trend is down, as illustrated by the descending red trendline drawn from the all-time highs set in March of 2000 and a lack of a corresponding valid VLT support trendline, which last terminated in January of 2008.  (The red and green vertical bars on the chart illustrate where Stops and Targets signaled the start of long term bull and bear markets).

ES is close to the .618 fib retracement from the 10/07 high (shown by the purple line on chart 1 above) and has already attained a 50% retracement from the all-time highs at 1201.

The first sign of trouble in the weekly timeframe would be the break of one of the dark green support trendlines.

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(click image to enlarge chart)

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2) The second chart shows ES daily bars since the last major high in October 2007 and displays trendlines showing the current LT, IT, and ST trend configurations.

The LT, IT, and ST trends all broke out of their downtrends at the points where each respective descending red trendline was terminated.  The dark green ascending trendlines represent present trend support.

(The green arrows show where major buy signals were generated by Stops and Targets)  (ARRA is the American Recovery and Reinvestment Act of 2009)

The steep ST support trend line has been recently broken.  I have drawn in a tentative bear trident (dashed red lines) to keep an eye on what could transpire in a worst-case scenario (or best case for bears) if the recent high were to hold.  I have typed in the word ‘bulls’ above that trident to reflect where the market would begin trending again if that trident is invalidated, and the word ‘bears’ where the first possible entry areas would be if the recent high were to hold.

The ST trendline is definitely being tested here—which agrees with S&T.  If the market continues to trade sideways/up over the coming days and the 1176.75 trading range low holds, then the door of opportunity for the bears may close.  If so, the new ST support trendline would be drawn from the February lows to 1176.75 and extended.

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(click image to enlarge chart)

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3) The last chart shows hourly bars and the VST timeframe.

The shaded blue area represents the present trading range between 1216.75 and 1176.75 created by the 4/26 to 4/28 sell off.

In my last post, I pointed out a VST trident channel and speculated that a pullback may come from the center tine and that the downside target might be the lower rail.  I don’t suspect that particular minor trident will be important going forward since the lower rail was violated to end the move—but it served a good purpose for watching intratrend movement and creating a VST buy opportunity just below the primary trend line..

On the upside, the ES 1207-08 area is interesting.  That was the original confirmation number from the spotter high and was an ideal short entry on a snapback retest.  It also lines up roughly with a back-kiss of the broken ST channel from the daily bar chart.

There is a small triangle forming because of constricting price action.  Those with very tight following stops likely will be using those converging blue lines.  The recent higher low and lower high forming that triangle, may set either the top of a bearish ‘M’ or the bottom of a bullish ‘W’ pattern leading to a range breakout.

The lines of primary importance (in my opinion) are the ones marked by ‘bull/bear stops here’, which are just inside of the trading range.

This is a tricky area, but as always, the goal is to come away from this range-bound volatility on the right side of the primary trend line.

…my .02