As we approach the end of the trading week and also the end of the trading month. let’s take a quick peek at the overall market structure here…
The highlighted area of the Stops and Targets analysis of the S&P 500 Futures above sums it all up nicely. An intermediate bull market is in effect above that timeframe’s range support, and bulls are currently all-good above short-term trend support currently at 2965.50. All stop/reverse lines are currently green.
Let’s take a quick swing through the charts starting from monthly bars and zooming in ultimately to the daily bars…
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The chart above shows monthly bars, which roughly correlate to Stops and Target’s long-term timeframe.
You can plainly see the stop sweep/reversal that happened under 2319.50 –and we can also see the two successive higher lows and higher highs, which paints a bullish trending sequence.
I have drawn in two possible channels where we will ultimate get some clarity on a sustained long-term move going forward. The dashed red channel shows a potential bearish path and the dashed green shows the bullish option.
It is still too soon to ascertain which way the February/March crash will ultimately resolve…but those channels are the two most likely long-term scenarios. If the rally underway is just the first secular bear market rally, then we would expect the right shoulder of an eventual ‘M’ pattern to form at or below that top rail of the descending dashed red channel. On the other hand–if the two-month decline is ultimately erased with new all-time highs then the dashed green channel will be the most likely new restraint.
It generally takes a while for these things to resolve themselves–so we just roll with it as it all unfolds. The big takeaway is to watch the consecutive monthly bar sequences in all timeframes. Right now, long-term bulls and bears are tied at 2-2 since the February all-time high. Bulls have some very nice gains rolled up since the bottom–but my advice is to keep those trailing stops tight as the vertical ascent off the powerful rise could be testing the limits of gravity a bit, at present. First sign of weakness would likely come in the form of a range top pullback that is later confirmed by a break under short term trend support–but until that transpires, the bullish trend change at 2965 is the hot long-term hand with trailing initial protective stops moved up under the last higher monthly bar low, which in a few days will move to 2760.25.
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The chart above shows weekly bars, which correlate to the intermediate timeframe at Stops and Targets. The last higher completed 4-bar pivot low stop sweep/reversal (shaded in green and marked 10 on the chart above) figures prominently in the analysis here. That point was the 10th and most recent installment of the Weekly Bar Paradigm that I have been pointing out here since the 2009 bottom. The pros, of course, targeted the stops under that line as per their usual modus operandi–tagged confirmed support at 2196 and then have rallied back strongly ever since. That point serves as the anchor for the bullish dashed green trident channel and it also serves as the first trendline point of the descending bottom rail of the dashed red parallel channel.
That continued efficacy of that weekly bar paradigm is what is currently being tested. The last higher weekly 4-bar pivot happened at 2846.50. The outcome of the current stop sweep/reversal around that line is what we are waiting to see resolved. If price can continue to rally higher and sustains above that line then we will have point number 11 in the bag in the sequence that has been in play since 2009. However, if price is unable to ultimately sustain above that line and we start to see a sequence of lower highs build–then the marvelous secular bullish trading paradigm will have finally played itself out. Stay tuned as we await the ultimate resolution to that question.
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The chart above shows the daily bars and has all three ranges superimposed as shaded rectangles. The intermediate and monthly bar ranges will update at the close of the trading week (and month) tomorrow. The new ranges for long-term and intermediate-term will be equal to the bar high and bar low of the monthly and weekly bars respectively at the close tomorrow.
The next major targets above are an open gap at 3103.50 and then a strong band of confirmed resistance between 3169.75 and 3201.50. First sign of potential trouble starting on a pullback would be a cross below the trending short-term range low (currently at 2965.50.
The number of single digit stocks is somewhat alarming. There are currently just shy of 700 tracked equities that are trading below $10/share and there are about 80 trading under $1/share. That is a bit sad since we know that many of those companies won’t ultimately make it. America is going to need a new renaissance of growth after this economic wildfire has cleared the weakest members of the old growth forest. It can happen, of course, but first we will need to similarly clear the stupidity and incompetence from the halls of government…of which I am decidedly less optimistic. Unfortunately, not one of those folks has lost even a single penny of pay or benefits in the past several months so they feel almost zero pain of consequence. Something dramatic is going to need to happen to save the Republic. Otherwise, we are all simply whistling past the graveyard as capitalists.
This pandemic (or ‘dumb-panic’) silliness has provided a rare opportunity for me to unplug and completely tune out for an extended period of time as I simultaneously am working on two major projects that require absolute concentration and mental focus on my part. It’s been a very productive month for me.
Really looking forward to watching the Space X launch on Saturday. If that goes successfully, it could mark a huge watershed POSITIVE moment in the American psyche. There are many folks out there, however, that really want to see America fail. I hope the security is tight and that the launch and eventual recovery is flawless. That launch is a potential market-moving news event over the weekend. Personally, I would love to see young people become enamored with real hard science again. It is high time, in my opinion, for social media driven depravity and pseudo science corruption to be swept into the dustbin of forgettable history. We are nearing a key decision point on what lies ahead–I can sense it coming, though I have no idea what it will be. The markets will lead the news and noise, as always.
Have a great weekend everyone!