ES Update

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In my last post I pointed out the February close line at 2095.25 as the intraday line in play–and we got the downside breakout right on cue at the close the next trading day.

The daily bar range chart above does a great job in illustrating the current big picture setup…

The high at 2110.25 has now morphed into an IT range top and we are in the process of building a lower ST range top at 2107 but still need a couple more days under that level to do so.

The action since the last ST low at 2030.75 has just been rangebound thus far–but we would need a break under the ST range low at 2030.75 or an eventual breakout above 2107 to escape the sideways action.

Keep that line at 2030.75 in mind as we zoom out to the weekly chart, which has been a flawless roadmap for the current administration and their pals in Chicago who have been engineering the illusion of economic prosperity–even when there really hasn’t been any, unfortunately, in spite of the trillions of new debt incurred during the current regime’s disastrous reign.

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So let’s take a closer look at that weekly ‘roadmap’ chart to revisit the key tendencies since 2009 as virtually unlimited liquidity has been used to manipulate the futures markets, which of course lead the cash markets via forced arbitrage…

The pros have been building a continuous series of higher lows (marked on the chart above with green dots at pivots).  Only five times since 2009 have one of those pivots been breached to the downside.  In every instance (except the one marked by a yellow oval) those breaks have been stop sweeps marked by sharp reversals.  So, the key for us is to watch how they build those pivots and to pay special attention when one is touched.  My thesis is that the paradigm change will come when we get a pivot low that is broken and not immediately reversed, but until then the game remains the same.

The last higher pivot low in the pattern came in at 1954–but if we were to get a poke under 2030.75, it could be set up for a potential new higher pivot low to form so long as 1954 remained untouched on the pullback.  Until/unless that happens, the current paradigm hard deck is 1954.

So, the key line in play currently is 2030.75 for the reasons explained above.  If the pros poke under that line we would see a resurgence of bearishness and selling as all new bullish positions since February could be instantly squeezed out.

As another aside, the current ST primary trend line at 2034 has been crossed dozens of times in the past five months.  This market hasn’t gone anywhere as it has been unable, thus far, to build a higher ST pivot low–and yesterday’s dip under that primary trend line assures that no new higher ST low will be built in the immediately foreseeable future.

This is a market trapped in an IT trading range with a contracting ST range embedded.  If they were to break under 2030.75, however, we would have a new lower high lower low sequence in the ST and that is what would draw in sellers.

Let’s see what happens here near the bottom of the ST range at 2030.75 in the coming days–and keep in mind the larger context of the weekly chart as others become fixated on the shorter term.

…my .02

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