ES Update

Let’s take a close look at updated charts, while we wait to see how this key test of the range top shakes out…

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Starting at the monthly bars…we can see the 4/20 touch of all-time high double-top resistance at 2100 and just how close ES is to the 2132.25/March 2016 time/price projection that we have been tracking here since the bear market bottom at 489.25 and the official technical end of the secular bear market back in September of 2012 when red trendline resistance on the chart above was broken out to the upside.

For a more detailed explanation of the time price projection methodology see my last ES Update post here.

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Zooming in to weekly bars to our ‘roadmap’ of the market since massive intervention started in 2009–we can see that the most recent stop sweep/reversal event occurred at point number 7, right on schedule.  What we are watching for now is to see if we will get the wave 5 breakout above the red trendline resistance similar to what happened after point number 3 back in December of 2011.

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Just to quickly refresh the Roadmap Paradigm for any new readers…

A bull market is best defined as a series of higher pivot highs and higher pivot lows–think of that as being like a set of stair steps climbing higher.  The pros have been using 4-bar pivots in their algorithms since 2009 in a very orderly and predictable controlled guidance of the market.  Each four bar pivot is marked on the chart above with a green dot for a pivot low and a red dot for a pivot high.

Since 2009 there have only been 7 instances where ES dipped has below the last higher pivot low.  Only twice has the market not immediately been bought after the stops were swept–at point numbers 2 and 6.  In all other instances the market was driven down to sweep stops and then immediately reversed into huge rallies.  I have pointed out each of those here in real-time.

The key point to understanding the weekly bar roadmap is that we will absolutely know when the paradigm finally ends by one very precisely-defined event. When we see a market that breaks below the last pivot low and is not able to rally back above that line, the paradigm in place since 2009 will be over.  At present, the last pivot low is at 1793.25.  So long as price stays above that hard deck on any pullback, the paradigm continues.  Obviously, the market is currently quite extended from that last pivot low–and so there is plenty of wiggle room to the downside to build a new higher pivot low, if the breakout attempt here falters. 

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In Wave Theory, impulse moves have five parts…  The first wave up finished on May 2, 2011.  The second wave down bottomed on 10/4/2011 at point 3.  The third, and most powerful wave, topped at 2100 on May 19, 2015 and then double-topped at the same number on July 20, 2015.  Wave four down bottomed on February 11, 2016 at point 7.  If the paradigm pattern continues–we would expect an eventual breakout above the red trendline resistance, which happened last week, to explode higher into the fifth and likely final wave to exhaustion in this carefully-engineered push from the bottom since 2009.  If that happens, what would follow next likely would be a unanimous Top Spotter signal from Stops and Targets across all the Index Futures and Cash Indexes and confirmed with huge numbers of spotters within components of the Russell 3000 Index (which represents 98% of all ‘investible’ US stocks).

So, here we are at the top of the range after a relentless push from the last major pivot signal at point number 7 that I pointed out in real-time at this post –and which was marked by the predictable panicked headlines across the media.

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The above image shows the weekly bars zoomed in more to show how the pros often use trident channels to guide the desired outcome.  Notice how price has recently been tracking the center of the channel as it has been held in place.

It is not uncommon for a major trendline breakout to be followed by a pullback to consolidate and regroup before the big upside move, but for the sake of clarity–let’s use the precise trendline breakout price of 2083 as a bull/bear line.  So long as ES is above that line it is wave 5, which is the terminal breakout wave to new highs and exhaustion where the pros will be shedding positions as the market nears the retail target for those wholesale buyers.

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Moving in one more order of magnitude to the daily bar/range chart…

Now the picture gets a little clearer regarding the touch of the range top at 2100 and the expected pullback from that resistance.  Notice here also how ES has been hugging the center tine of the intermediate-term (IT) trident channel as the pros first broke short-term and then intermediate trendline resistance (red descending trend lines) on the way to the big 2100 target.

The shaded rectangles on the chart above represent current trading ranges by timeframe: the lightest yellow is LT (1804.75 to 2093.25), then the next darker shade of yellow is IT (1793.25 to 2093.25),  then bright yellow is ST (2026 to 2105.25), and finally very-short-term (VST) is gray.

This morning’s pullback to 2070.25 was the absolute minimum required move to establish a potential new higher ST pivot low.  The pros are nothing, if not efficient, in their quest for maximization of profit.

The dark red dashed descending trident channel is built from the current last three ST pivots.  A break above that top rail would invalidate the channel–but if we get another move lower, the top rail of that channel would be what the professional bears use to move their trailing stops lower to lock in accrued profit.  Remember what I said in a previous post about the recent stop sweep of the bears above 2100.  There would seem to be no reason for the pros to go back above that line–unless their intention is a breakout and push to new highs.  A move above that dashed dark red trendline resistance would be a clear sign to get out of the way for any bears who are trying to game this on the counter-trend side.

Be aware of the ‘tractor beam’ center of the IT bullish trident channel.  That is what the pros are using to pin the market right now.  If we get a sudden break south, counter-trend bears could have something working–and the downside target would be the dark red channel bottom.  Otherwise, there is NO resistance above 2105.25 if we were to get a wave 5 breakout that sticks.

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And finally, moving in to the realm of very short-term traders, the chart above shows the same setup zoomed in to hourly bars to help fine-tune support and resistance targets.  Today’s action so far has been a run between VST support at 2071.50 and VST resistance at 2093.25, and is still being pinned right around the center tine of the IT trident channel.  It would take a breakout above the descending dashed red trendline to get the professional bears covering and to bring in new buyers looking for a momentum breakout above 2100.  If downside momentum were to resume, then a breakout under today’s low at 2070.25 would bring in sellers.  Otherwise, today has thus far been an outside bar where stops were taken above and below yesterday’s bar range.  The FOMC announcement yesterday is the thing that is currently being gamed and once the pros are done shaking nickels out of the day traders we should get a directional move out of this area using the numbers I mentioned early in this paragraph.

The last four trading days have been: 1) outside bar, 2) inside bar, 3) outside bar, 4) outside bar.  That is about as brutal as it gets for very short term traders!  This sort of action reminds me of a basketball center who has just pulled down a rebound and then violently throws elbows from side to side to push away other players.  The pros definitely want the ball here and they want small traders NOT to have the ball.  So, what do ya’ suppose comes next?  😉

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Note how this morning’s engineered takedown went right to confirmed support at 2071.50 on Stops and Targets, which is also looking for 2100 as the next upside target.  It’s all good for short-term bulls above 2071.50, but a move under that line would be a Stops and Targets counter-trend sell signal.

…my .02

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