ES Update

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We got the new lower weekly 4 bar pivot at 1821.75 on the close of last week’s trading that I have been awaiting.  That pivot is marked as point number 6 on the weekly chart above.  Since 2009 we have now had just six occurrences where price violated a 4-bar weekly pivot low.  On all but one previously, the recovery was immediate after a stop sweep –and those pivot lows (with one exception) were not touched again.

The one outlier was at point number 3 –where we eventually got a double bottom eight weeks after point number 2 was established.  So. let that sink in for a bit…in six years of trading, these pivots have a 75% success rate at marking significant bottoms, with the one outlier dipping a mere 3 points under it’s double bottom twin before rocketing higher.  So, if the paradigm continues, there is a pretty good chance that 1821.75 could stick here as a bottom.  As I type, we are near the top of the 3:1 ideal gain to risk entry zone for a potential trip back up to confirmed resistance at 2025.  I have marked that weekly bar ideal entry zone as a blue rectangle on the chart above between 1821.75 and 1871.

So, if the pros go with the standard metric we could be near a potential bounce zone here for a possible run back up to the 2025 area.  The hard deck for counter-trend bulls now is that key pivot at 1821.75.  If that were to fail, the next major target lower would be the stops under 1781.75 and in a full-blown takedown the next target below there would be the rising trendline support drawn off the 2009 bottom and the bottom at point number 3 on the chart above.  That trendline is presently near the 1650 area.

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In recent posts I have been talking about the underlying structure that would need to be built to stabilize the market after the takedown to 1821.75 –and so far it has been ticking along like clockwork.  We got the short-term lower high at 2011.75 and next up is the likely formation of a higher ST low–dependent, of course, upon the higher timeframe weekly pivot at 1821.75 holding.

As I pointed out in my last post, it is always about the stops in situations like this–and the pros went for the stops under 1889.50, as expected.  If we get a rally that crosses above that resistance, we should see buyers come in above that line and the new ST trendline resistance would be the target of that trade.  That descending trend line is currently near the 1975 area.

So, head’s up in this area for the start of a potential rally but realize that when the market makes as violent of a move as it did between 2094.50 down to 1821.75 the trading oxygen is temporarily sucked out of the market as the pros switch from being buyers of premium to sellers.  If that thesis is correct and I were pulling the levers, I would lay in a higher ST pivot inside that blue rectangle on the weekly chart above and then work the range between that low and the recent ST pivot high of 2011.75

As I type, the current candidate for a new ST pivot low is 1861 and it meets all the parameters that I have been looking for, though we could see a bit lower still somewhere inside that blue rectangle on the weekly chart.  The next targets lower if 1861 is taken out would be 1851, then rising ST trendline support, then an unfilled gap at 1819.25 …and if they were to take out the weekly pivot the next major target would be the stops under 1781.75

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Stops and Targets is looking for 1851 as the next ST/IT target lower, and you may recall that was the original buy to cover target I pointed out on the takedown from 2094.50.  My thesis has been that the pros may be accumulating near that area with 1821.75 as their hard deck as they run out the clock on option premiums.

Head’s up here at 1889.50 resistance area.  That line can work as an intraday bull/bear line as we watch to see if yesterday’s move under the line ends up being a stop sweep/reversal.

…my .02

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