(click image to enlarge chart)
(same chart at end of day Friday 1/29/10)
The chart above shows the latest ES (S&P e-Mini Futures Option) VST trend channels.
The bears remain in control to varying degrees under the top rails of the channels shown…
This morning, the purple rail (representing the most aggressive bear constraint) turned back an early rally. That interaction also coincides with the crash gap (represented by a shaded yellow rectangle).
For bulls to get anything going here–at a minimum, the purple trendline has to be breached to the upside.
Next up would then be the presently dominant dark red channel top rail…then the red channel top rail where the VST bear trailing stops are likely resting.
Since the ST trend change, the trade is and has been short up to now. The ST bears selling the break at 1129 area are now +43 (edit: now +60 at Friday’s close) with trailing stops at about 1105 (just above descending red trend channel) locking in at least 24 points (edit: VST trailing stops now at 1102 locking in 27 points at close).
The dark green trend line at the bottom of the chart represents the multi-month bullish trident and has not yet been touched (though it came close). (Edit: dark green trend line was touched intraday on Friday)
There is another bull stop zone located under 1066 area that would be the next likely candidate for buying (to cover) and could potentially generate a stop sweep reversal play if reached.
Bears remain firmly in control until/unless at least one of those downtrend channel lines are broken.