Market Update

It has been awhile since I last posted an update, so let’s take a peek at the Big Picture by looking at the three major trading timeframes of the S&P 500 Futures Option using Stops and Targets and my charts…

 

 

The screen capture above comes from Stops and Targets and shows a summary analysis of the current configuration of the S&P 500 Futures Options.

My eyes always start at the top left of the analysis page then scan across to the chart and finish finally at the block of analysis text…

At the time I am typing this –> the futures are up slightly by +1.50 and I see that the multi-trend configuration is fully-bullish (Bull 10 rating) and all three trends are up above the short-term stop/reverse line, which is currently sitting at 3,116.50

The most recent range envelope signals are all upside breakouts at 3,133.50, 3,132.50 and 3,055, respectively.  The short-term and intermediate trends are trending bullish and the long-term trend has broken out to the upside of the previous range.

So, bottom line here is that it is all good for the bulls above the short-term stop/reverse line at 3,116.50

For things to start flipping south we would first see a negative quote price, followed by a counter-trend sell alert on the range envelopes, and then a move underneath the stop/reverse lines–starting with short-term, then intermediate, and finally long-term.  With a break underneath the short-term, the next major target lower becomes the next lower stop/reverse line, etc.  See how all that works?

It takes just a few seconds to quickly size up any tracked security using that basic workflow.  For times when you want to really dig into the details, then carefully read the block of analysis text.

Now, with that all said–this market might be extended here and has definitely been ‘climbing the wall of worry’ associated primarily (in my opinion) with the embarrassing antics of the increasingly-desperate globalists.

 

So, let’s dig in a bit deeper and carefully compare what Stops and Targets has summarized above with my timeframe charts that follow.  As many of you long-time readers know, I use monthly, weekly, and daily bars (to identify long-term, intermediate, and short-term strategies respectively)…

 

 

Let’s start by looking at the monthly bars for the long-term and very long-term picture…

What I really want to point out are the 12-month pivot highs and lows marked by red and green dots on the chart above.  As I have stated many times in the past…my definition of a bearish market is a series of lower highs and lower lows.  On the chart above, you can see the bear market from 2000 to 2009 had a series of lower high pivots (see red arrows and red dots).

The bear market bottomed in 2009 and formed a 12-month pivot low there (the lowest low of 12 monthly bars, both to the right and left).

Since the market bottomed in 2009 there have been two higher 12-bar pivot lows formed (see long green arrows).  Interestingly, there have been ZERO 12-bar pivot highs formed since 2009!

We are about to officially form the THIRD higher 12-bar monthly pivot low at 2,328 from the December 2018 pullback low.  (see the green shaded highlight on the chart above).  That new higher low will become official if price continues to trade above that line through the close of next month’s bar (December 2019).  If/when that happens, then the very long-term trend line will move to connect the last two higher lows at 2,328 (December 2018) and 1,797.25 (from February of 2016).  See how that works?

Note that the last major bounce at the December 2018 low occurred right at that very long-term trendline (see shaded green highlight) and was pointed out right here in real time.  🙂

So, needless to say, knowing where that key trendline lives is critical to understanding how savvy pros determine the difference between a secular bull and bear market.

Note on my chart above where I highlighted in yellow the official end of the secular bear market way back in 2012.  At that time I wrote ‘this is a huge deal!’ in a post pointing out that technical analysis breakout here in real-time.

Eventually this amazing bull market is going to run its’ course and enter a new secular bear.  We will know when that happens when the pattern reverses to break the support trendline and eventually starts to build a red resistance trendline formed from lower highs.  We are far away from that point, obviously–but the trick is to see the budding reversal coming LONG before the official trendline break –> and the way to do that is to watch for the first break of a previous month’s low in a trending bull market, because that always HAS to happen as a precursor.

As I type, the previous month’s low is way back at 2,855 (see long-term range envelope bottom at Stops and Targets) but once November closes out and December trading begins, the long-term range envelope bottom will move up to this month’s low, which is currently at 3,033 so long, of course, as price does not drop below that low before the close of the monthly bar.

See how that works?  It is important to understand that.

Take a look at the small green up arrow on the monthly bar chart above from way back in April of 2009 at 659.25.  That was the most aggressive possible BUY signal for bears to cover and REVERSE their trading bias to long.  That HUGE signal happened just one month after the 2009 bottom was set.

When this bull market eventually ends, you will see the mirror image opposite SELL signal form when the bullish series of higher lows is taken out by a move BELOW the last months higher low that DOES NOT recover back above.  That is unlikely to happen this month barring an extraordinary sell-off, but starting in December, keep a close eye on the previous bar’s low if we start to get a significant sell-off that cascades through short-term and intermediate stop/reverse lines.

If you didn’t get that, please reread it again until you understand–because that is the whole ballgame right there if you want to protect your precious trading capital once the market rug eventually gets yanked.

Pro tip:  Be very mindful of who just entered the Presidential race on the democrat side and the immense power his company wields over these markets.  The democrats think the only way they can beat Trump is if the economy tanks, so (in my opinion) beware!

Long-term investors can use the techniques I pointed out here on all of your stocks in your portfolio.  Stops and Targets will tell you exactly what to do when the time comes, but you will have to be mentally prepared to exit when you see the pattern confirmed.

The pros will do everything they can to gap and trap the bulls when the reversal time eventually comes.  It will probably take every fiber of our being to fight our instincts and to ignore the news and noise propaganda when the reversal eventually starts.  Trust me on this.

We have had a great ride on this bull market since 2009, but now could be a good time to start becoming extra cautious (in my opinion).

 

 

 

Next, let’s move in to the weekly bars to assess the intermediate timeframe…

Using the same pivot analysis technique, take note of the 4-bar (monthly) pivots highlighted above.  What we are primarily interested in, at present, are the recent sequence of higher pivot lows.  The last one occurred at 2,855 and so that now becomes the hard deck for the amazing Weekly Bar Paradigm that I have been pointing out here for the past nearly 10 years.  The pros have been periodically using those 4-bar higher lows as stop-raiding targets since the 2009 low–and I have now pointed out 10 previous instances where they took out the stops underneath and then reversed and rallied afterwards.  All of those instances were ideal pullback entries to ride the bull market.

If we were to see another sell-off start, the obvious downside target for the Weekly Bar Paradigm will be the stops under the last higher weekly 4-bar pivot low.  Currently, that would be under 2,855.

As I have been saying for years… “We will know with absolute certainty when the Weekly Bar Paradigm has ended when we see a break below a previous weekly higher 4-bar pivot low that DOES NOT recover back above that pivot”.  Once that last higher low stop sweep/reversal pattern is eventually broken, then we could start to see a new lower high pattern begin during an inevitable cyclical bear market phase.

Note that we haven’t had a lower high on the weekly bars for nine consecutive weeks!  This market could be very extended here, so again, keep a close eye on the last weekly bar’s low (see Stops and Targets intermediate range envelope) for the first sign of a sell-off, if one comes.

 

 

 

And lastly, let’s zoom into the daily bar/range chart above to see all three timeframes superimposed…

As I stated at the top of this post, and Stops and Targets agrees… it is as bullish as it can get right here.  It’s all good above the short-term stop/reverse line, which is currently set at the 3,116.50 previous daily bar low–since that timeframe is trending (moving the stop/reverse line higher with each consecutive higher low).  First sign of potential trouble would be a break under the short-term stop/reverse line on a daily bar CLOSE followed by a sequence of lower highs on the daily bars that would eventually move the stop/reverse line lower.

The intermediate range has tightened but the long-term range is still lagging after the recent upside breakout.  When the November bar closes, it too will tighten and show a bullish trending pattern if prices remain above the current long-term stop/reverse line at 2,957.25 through the end of this month.

It’s all good for the bulls until it ain’t… and the paragraphs above should help to point out exactly where that would start to occur if/when things start to change.

…my .02