ES Update

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Today is the Labor Day holiday and most US markets will be closed.  Globex futures opened last night at 5 pm and will halt trading this morning at 10:30 am.  Globex will reopen this afternoon at 5 pm.  (Chicago time)

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Screen Shot 2013-09-02 at 8.10.05 AM

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I pointed out the bounce setup at my original downside target of 1626.75 and the actual local low came in just below at 1624.75.  In my last post I also pointed out the potential for a stop/sweep reversal setup centering around 1631.50–and that has now happened.  Our friends in Chicago have been busy little beavers in the thin overnight trading session and we see a new breakaway gap in place at 1631.25 with ES futures up +16.50 as I type.  The VST bears who missed the cover setup under 1631.50 are now trapped and being squeezed.

The upside stop targets are shown on the chart above.  The first set is just above the descending VST trendline resistance 1652.50–and the second set are currently above the bearish trident channel near 1677.

Technically, ES is trying to build a short-term lower high/lower low structure at 1667.50 and 1624.75.  That is already the VST range and those two numbers are the key for future action.

Typically, breakaway gaps (that aren’t filled) express intent and if that turns out to be eventual case here, we could have a short-term low in place at 1624.75 if ES can remain above that line for the next few days.  If that happens, the last lower high in the sequence was at 1667.50, and that is what would need to be eventually taken out to break the downtrend sequence and add in the first ‘higher high’ that would be the requisite for confirmation of a new uptrend.  As I said before, however, the key numbers in play are the range between 1624.75 and 1667.50 and it would take a breakout on either side to get trending again.

 

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Screen Shot 2013-09-02 at 8.24.26 AM

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Stepping out to look at the big picture using the monthly bars…

Last month’s pullback was a reaction to taking out the old all-time high at 1685.  Huge partial profits were taken (yay) and once the bear stops were run above 1685, the sellers taking profits and shorts working counter-trend combined to outnumber the available buyers.

As I have been saying for a long time–to my eye there are two potential paths here once the selling around 1685 has all been digested…we could get a renewal of the ST rally trend and possibly target the top rail of that big VST trident currently near 1760–or if we get a breakdown and continuation of the ST downtrend, the next really big downside target is that rising VST trendline support currently way back at the 1390 area.

Structurally, August was a bullish bar as a result of a higher high and higher low–so from the perspective of institutional level traders, the pullback from 1685 wasn’t anything to be too concerned about since the July low of 1553.25 was never threatened.

Now that we have a new monthly bar building for September, the August low at 1624.75 becomes very important.  If ES were to break below that low–that would be a momentum sell on a monthly time frame, and that is the realm where the big boys live.  So, as I pointed out in the paragraphs above–keep an eye on 1624.75 from here.  If that monthly low is broken, we could see sellers come in with volume and the potential for a pullback all the way to the rising VST trendline support.

So, remember 1624.74 is a big deal now as we watch to see how this bounce from that key support goes.

Technically…

VST is range bound between 1624.75 and 1667.50
ST trend is down < 1670.50
IT trend is up > 1566.25

…my .02

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