ES Update

Screen Shot 2015-09-22 at 9.50.40 AM

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Going into FOMC and OpEx the pros did just what I expected by running the bear stops and setting up a potential ST lower pivot high inside the ideal entry zone (shown as a shaded red rectangle on recent daily charts) before pulling back.

The focus on the daily bar chart above is creating five bar pivot highs and lows, which is what often sets up the short term trading range.  Right now, that range is extremely wide due to the orchestrated rug pull from 2094.50 down to 1821.75 (the current ST trading range!).  The FOMC stop-running pop up to 2011.75 created the minimum necessary to eventually build a lower ST pivot high.  We will need two more trading days under that line to lock in that lower high.  This morning the push under 1935.25 down to 1925.75 established the minimum necessary to potentially set up a higher ST pivot low and again we are back to the 1937 tractor beam line that has been used to kill premium on options that were sold on the takedown.

The way the pros usually do things is to build pivots by cascading timeframes.  We already have a narrowed VST range between 2011.75 and 1889.50 and those two numbers define the current constraints as we watch to see where the next ST pivots will eventually build.  The bull and bear stops are now sitting just below and above that range, respectively, so if the pros want to scare up sellers below or buyers above–that’s where they will go.

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Screen Shot 2015-09-22 at 10.08.27 AM

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Zooming out to our weekly bar roadmap…

The key to focus on here are the four bar pivots.  If this week remains above 1821.75, that will become the latest weekly bar pivot low (#6 on the chart above).  Note that the current ST pivot high candidate at 2011.75 won’t work as the next weekly bar lower pivot high since there are only three lower range weekly bars to the left, so at some point we could eventually see another push back up to accomplish that goal.  There are lots of ways for that next lower pivot high to eventually unfold, so we just have to wait and see what the pros have in store for us going forward.  Note that it took eleven weeks to eventually build a lower weekly high near the double bottom at point 3 on the chart above, so these higher timeframe setups can sometimes take quite a while to unfold.

The key lines on the weekly chart are confirmed resistance at the 2025 IT primary trend line and the fledgling weekly pivot low at 1821.75.  Price is currently trading near the approximate midpoint of that range ((2025 + 1821.75) / 2 = 1923.50).

Remember, the close-in stops are located at 1889.50 below and 2011.75 above as we continue to meander sideways in the aftermath of the orchestrated takedown to 1821.75.  If we do get a new 4-bar weekly pivot low at the Friday close along with a 5-bar pivot high on the daily bars, the next order of business once the next ST pivot low is locked in could be building a 4-bar weekly pivot high–barring a collapse to the downside, of course.

Wave four type declines generally confuse most traders–but not us.  We definitely saw this coming and so now just have to tread cautiously as we wait to see where the bottom will eventually form.  ST and IT trends are down under 2037.25 and 2025 respectively, so path of least resistance is down and odds continue to favor bears as we watch the remainder of this week to see if the pros will allow 1821.75 to build as a 4-bar weekly pivot low.

…my .02

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