Market Update

In my last post I pointed out the resistance band located between 2846.50 and 2952.75 and explained why those resistance levels were important going forward…

 

click image to enlarge

 

The Weekly Bar Paradigm stop sweep/reversal line is located at 2846.50 (see the dashed blue horizontal line on the chart above).  We will know with absolute certainty when the amazing secular bull market that has been stampeding since 2009 has finally ended when the market is unable to rally and ultimately hold above the last higher weekly 4-bar pivot low.   The last higher weekly 4-bar pivot low was at 2846.50.

Note that if/when we start building  a trend of lower weekly 4-bar pivot highs then we will officially be in a new secular bear market.  I have no way of knowing how this ultimately will play out going forward–but that line is only the 11th occurrence of a long-term entry strategy that has worked brilliantly for the past 11 years –> so we’ll continue to keep a very close eye on it going forward.

This morning the market filled an extremely important open gap at 2952.75, which is the top part of the resistance range I pointed out –> so this is that point of reckoning that I ranted about in my last post.  The S&P Futures traders love to fill open gaps.  You can see what I mean by observing the previous bearish gaps colored magenta and the previous bullish gaps colored cyan on the chart above.  As a recent point of reference–note that the bottom of the powerful thrust down from the top filled an open gap at 2252.50 before turning and burning back northward in a scorching bear market rally that is now six weeks old. 

This morning we hit the next major higher gap and once it filled the sellers immediately came in.  There is one more open bearish gap way up at 3328.  That is exactly where the pros gapped and trapped the bulls on an opening rout back in February.  The most elegant solution for gap traders would be an expectation of a trip back down to 2482.75 followed by a leg back up trying to ultimately fill 3328. That is one of many scenarios that could play out.

Much damage has been done to this market and when one looks at what it will take to get back to the point where that upper gap gets filled–well, clearly some serious work will have to be done and usually that takes time–though a couple trillion dollars being injected to juice the markets could certainly help.

The easier path for the market in the long-term would usually be down since the long-term timeframe is trending bearish under 2965  (starting tonight at the close unless the market trades higher than 2965 today).  However, if price can hold near the top of the current monthly bar today then there is a possibility for the market to be moved above the previous month’s high in the coming trading month, which would be a long-term trend reversal to bullish!

So, do you now see what I mean about an upcoming point of reckoning?

The pros love to set up these win-win situations for themselves in advance of an upcoming major news event.  That event could be the reopening of the economy starting in May for a bullish resolution higher.  It could also be something much more ominous that we can’t yet see coming–like an escalation in the thus-far undeclared US war with China, for example.  So far, that war is being fought economically, but these are the exact sort of historical environments where global conflagrations can erupt.  If not that, then something else ominous that could give an excuse to push the market lower in the coming month.

 

 

click image to enlarge

 

The chart above shows monthly bars, which correspond to the long-term timeframe at Stops and Targets.  Today is the last day of the trading month for April.  The April monthly bar (an ‘inside bar’ is where the low is higher than the previous month and the high is lower) will go from live to static at the close today and the range envelope numbers will update accordingly across all symbols.

The black box trading algorithms that focus on digesting monthly bar data will have fresh levels to pursue starting tonight when those reference points are updated…

For example:  the monthly bar range for the S&P 500 Futures (ES) will change from the current 21743125.74 to… 2424.752965 (unless one side of the current April range is exceeded today).  For the pros, that means counter-trend long-term profit stops on the bullish side will be advanced to 2424.75 to lock in bear market rally gains from the 2174 low.  That also means that the trend-following stop for bearish trades will be moved lower to 2965 to lock in gains on the short side from 3125.75

 

 

When I read the range envelopes above, I would say to anyone who asked my opinion… we are currently in a short-term pullback below 2959.75.  The intermediate range would also generate a counter-trend pullback alert if price were to trade below yesterday’s breakout at 2875.50.  That is all in the context of a long-term bear market rally that started at 2174 on 01-Apr-20.

So, basically the pullback I predicted at the gap fill has started and it remains to be seen how deep that pullback goes.  It’s still technically all good for bulls–especially if price climbs back above 2959.75  but bears could start to get rolling if price were to drop below 2875.50–and especially if the short-term trend were to flip on a bigger move below 2860.75.

Let’s see how this day goes and then more importantly what happens at the start of the new trading month tomorrow.  Head’s up here.  Everything is lined up nicely for a possible nudge one way or the other from the pros.

…my .02