ES Update

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The two lines in play today should be 1555.25 and 1533.25, which was Friday’s daily bar high/low range.  The battle is on here between counter-trend bears who see the VST lower high sequence–and trend-following bulls, who saw the ideal entry zone buy signal at 1533.25, with a trailing hard stop at 1529.50

If price rallies through 1555.25, the daily bar lower high sequence will be broken and we should see counter-trend bears start to cover.  If Friday’s low is ultimately taken out, then the bull stops under 1529.50 could come under pressure as we would have the potential for the first trend flip since late February.

Technically, the correct trades here were VST counter-trend short from 1558.75 down to 1533.25 (inside the ST ideal buy zone), with at least partials covered there–and ideally, a full reversal back to join the macro trend, which remains up above 1529.50.  For those bears who are front-running a potential technical ST trend change, the obvious trailing buy to cover stop level is currently at Friday’s high of 1555.25.  If that were to be taken out, then as mentioned previously, the daily bar lower high sequence would be broken.

Since the trend remains up > 1529.50, the conventional strategy is to buy the dips into a 3:1 or better gain to risk ratio–which is what the ideal buy zone represents between 1529.50 and 1536.  The next upside target from that ideal buy zone entry at 1533.25 is a backtest of the countertrend sell signal at 1558.75.

We are watching here now to see if Friday’s low can withstand a pullback test.  It is important to note that even if it does, we will have the first lower low in the VST sequence, and that is bearish until/unless the last VST high (currently 1568) is exceeded.  The VST trend leads the ST trend and the ST trend leads the IT trend, and so forth–so we must keep an eye on this pullback to test that fledgling buy and the magnitude of the subsequent rally, if it comes.

For now, we appear to have a stop sweep/reversal play underway from the dip under the last VST structural low at 1535.  If that low holds, then we could see a new ST higher low eventually develop–but if the hard stops under 1529.50 are taken out and held, then selling will likely accelerate as profits are taken by trend followers and the disciplined technical bears pile on.

So, I know this sounds like a broken record, but it remains all about 1529.50 in the higher time frames.  All major trends remain up above that line, but a failure to hold that level either on a pullback or on a stop sweep and reversal would be the first technical break in the macro structure.

…my .02

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