ES Update 6/7/10

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(click image to enlarge chart)

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ES sliced right through trendline support and the minor stops at 1067 area.  The push down was initiated (in my opinion) to take bull stops under the 1055.50 May 26 low, and that line should work nicely today as an intraday bull/bear line (intraday price action is bullish above and bearish below).  If that line is taken out to the downside, then the February lows would be the next likely target lower.  Otherwise, 1093-1097 would be the next intraday upside targets (in my opinion).

All of this volatility is essentially meaningless in the macro trending picture—but eventually this range is going to break out and trend away from the long-term primary trend line.

This is a confirmed intermediate bear market thus far, and price has been locked into a consolidation zone around the long-term primary trend line awaiting an answer to the prime macro trending question…

Is this merely an intermediate pullback to long-term support awaiting a resumption of the macro bullish uptrend…or has the recent selling been the opening salvo at the start of a new long-term macro bear market?

The ultimate answer to that question may be found by studying the February 5, 2010 lows across the major futures contracts.  It is important to observe that the ‘mini crash’ was halted just short of breaking through any of those key structural pivots…and that was significant in terms of shaping the ensuing tactical environment.

For a quick reference those key February lows were as follows—with the recent low placed alongside…

ES 2/5/10 low = 1036 (recent low = 1036.75)
NQ 2/5/10 low = 1708.25 (recent low = 1730.25)
YM 2/5/10 low = 9731 (recent low = 9757)

Those February 5, 2010 lows define very important structural pivots just underneath and if they are ultimately broken—it will likely generate tremendous bearishness and very large trading volumes.  On the other hand, if those lows hold—either outright with an upside resolution out of this consolidation zone, or after a stop sweep reversal, then we could potentially have a foundation for a resumption of the bullish macro uptrend.

Beneath the February lows exists the potential for a huge treasure trove of selling if the pros wish to take it there—but nothing says it has to go down there—or even that it has to go down there anytime soon.  What matters most here is staying on the right side of the S&T primary trend lines while awaiting resolution–and staying in position to capitalize on a trend breakout, should it come.

Presently the trends are as follows…

IT down < 1131
ST down < 1107
LT down < 1083

The key is to keep the large perspective in mind while managing the shorter timeframes for positioning.  For now, the intraday line at 1055.50 should serve as a reasonable intraday bull/bear line for very short-term traders.  The game inside this trading range is to run stops and to punish the less nimble traders chasing the wiggles in light volume.  The key structural numbers for ES, however, are the February low at 1036 and the recent minor high at 1107.75 and obviously, a push through one side or the other will be required to eventually initiate a new macro trending move.

…my .02