The Mother of All Rallies is closing on a potentially important target at 3802.00 where 'selling the news' will become an opportune bet. It would become still moreso if the election is settled when the futures get there, vaccine euphoria is in high gear and the Wall Street Journal is doing its patriotic best to convince us that all is right with the world. From a technical standpoint, the futures blew past the red line with such force on September 9 that there can be little doubt they will reach the D target. The only caveat is that a bigger picture pattern has a 3769.00 target that could conceivable stop the rally cold. Either way, a potentially important top looms at a time when the din of bullish hubris is so loud that it could practically make one bleed from the ears.
I had expected the receding prospect of economic recovery to weigh on the markets last week, but it seemed not to have fazed buyers at all. They stood their ground even though the impact of new vaccine stories seems to have fallen off considerably since the big Pfizer announcement two weeks ago. Now, it would seem, there are a half-a-dozen players, and it's hard to tell which could deliver a cure that might put America back on track. In the meantime, bears should forget about reaping a bonanza right away merely because deeper recession looms. You can use the 3798.50 target shown in the chart as a minimum upside projection for the holiday season, and p=3498.75 as a place to park a 'mechanical' bid. The required stop-loss at 3398.75 implies entry risk of $5000 per contract, so we'll want to convert the set-up using an rABC on the lesser charts to cut it down to size. For now, our short-term trading bias should remain bullish.
I've used a long-term chart not only to show an obvious and somewhat ambitious rally target at 3857, but the decaying pattern that produced it. It has already signaled a profitable 'mechanical' buy once at the green line (x) and would do so again if the futures were to revisit it. Although the pattern would have produced a solid profit for 'mechanically'-minded bulls, its strength has deteriorated, along with the prospect of effortless gains on the long side. Notice that the futures were unable to reach the mechanical trade's 'sweet spot' above the red line before relapsing to x. Also, anyone who got long at x would have suffered considerable pain on the pullback to within an inch of the 3197 stop-loss. Another sign of, if not weakness, then reluctance, is last week's failure to reach p2=3693 (the pink line). This implies that weakness and uncertainty are gaining a hold even if there is still a perhaps 70% chance of ES reaching the target. Our trading bias should remain bullish accordingly, but less aggressively so than during last summer's run-up. _______ UPDATE (Nov 16, 7:25 p.. ET): Buying interest has been so relentless that "less aggressive" trading is guaranteed to miss the boat. At least we know where ES is going. ______ UPDATE (Nov 17, 7:47 ET): We'll step back as ES takes the measure of a potential obstacle in the form of p2=3648. A pullback to p=3498 would trigger a 'mechanical' buy with a stop-loss at 3398.00. ______ UPDATE (Nov 19, 8:34 p.m.): Use a low-level rABC set-up to get long once the red line has been touched, but don't attempt it if you're not up to speed with this tactic.
The rally slightly exceeded my minimum projection of 3500, but not by enough to clinch more upside to the pattern's secondary pivot (p2) at p2=3651, let alone to D=3802. Bulls have already used up a 'mechanical' set-up made possible by a pullback two weeks ago to the green line. The result, although solidly profitable, would have taxed traders with a pullback that nearly stopped out the position and put it briefly in a $12,000 deficit. The ups and downs didn't negate the target, although they made clear that investors were especially anxious about the election. And so they shall remain, with little relief in prospect if Biden's victory holds. If the stock market seems stable or even moderately buoyant in the weeks ahead as I expect, we should infer that shares are under deft distribution by smart players. We shall respond accordingly. ______ UPDATE (Nov 9, 8:03 a.m. ET): Overnight, the most powerful rally in history hit the p2 target at 3651.19 (see inset), pulled back 50 points, and now looks eager o go for the next, 3802.25. The targets and trend forecasts work so perfectly that there would be little point in my trying to explain what has happened. You either believe it is rational or you don't -- and even that has no value. _______ UPDATE (Nov 9, 6:08 p.m.): The rally detumesced by half, but not before exceeding the secondary pivot at 3651 by 17 points. That's enough to shorten the odds of a follow-through to 3802 without quite guaranteeing it. A pullback to the green line at 3349, however unlikely, might seem like the end of the world, but keep in mind that it would trigger a 'mechanical' buy, stop 3197. _______ UPDATE (Nov 11, 5:56 p.m.): This minor bullish pattern has delivered two profitable 'mechanical'
A 100-point drop into the void would present an interesting 'rABC' opportunity to bottom-fish, but I'll wait for it to happen before I try to offer timely guidance in the chat room. In the meantime, we can divide our attention with the pattern shown, a 'reverse ABC' that can be traded just like its conventional cousin. I've sketched in a hypothetical 'mechanical' entry if the week should get off to a strong start. Ordinarily I'd say investors are too jittery to pull it off, but on Friday they tripped two theoretical buy signals with successive rallies to the green line, implying bulls were feisty enough to at least fake themselves out. ______ UDPATE (Nov 2,8:54 p.m. ET): The opening hour generated a bullish impulse leg on the hourly chart but no easy opportunities. I take the upbeat finishing stroke a day ahead of the election as a vote for Trump. _______ UPDATE (Nov 4, 9:47 p.m. ET): The 3435.50 target provided in the chart served well as a place to get short, as some subscribers evidently did. The 119-point plunge from within three points of the pivot could have been worth as much as more than $5900 per contract to night owls paying close attention. The subsequent rally was even more dramatic, pointing toward a move now to at least 3500.13. That's the midpoint resistance of a pattern on the daily chart that began with A= 2972.00 on 6/29. If the futures get by it, a push in to 'no man's land' around 3560 would be a good place to look for a short. Set it up with a 'reverse ABC' pattern on a chart of 15-minute degree or less. _____ UPDATE (Nov 15, 8:48 pm.): Today's powerful thrust slightly exceeded the 3500.13 target given above before pulling back just an
The 'mechanical' trade that triggered last week at the green line remains in play, as does the 12,804 rally target. I have not continued to track the trade because as far as I could tell, no subscribers took a position over the weekend. The stop-loss is at 10,655, just beneath the pattern's point 'C' low, and the minimum profit target is p=11,730. Price action was pretty wild on Thursday and Friday, suggesting investors are stressed to the limit about the outcome of Tuesday's vote. Although they can't take the day off, we can. Stocks could gyrate even more violently than they did last week -- or vibrate nervously like an electrical arc. Either way, I'd suggesting spectating from the sidelines. _______ UPDATE (Nov 4, 10:06 p.m. ET): The futures were on track for a follow-up thrust to the 12,136 target shown in this chart, but I wouldn't suggest trying to get short there unless you've made a few bucks on the way up. An rABC ticket is the suggested tactic. _______ UPDATE (Nov 5, 8:53 p.m.): A two-day melt-up to 12,119 came within a tenth of a percentage point of the 12,136 target given above. That could be it for a while, but we'll let price action speak for itself. A close on Friday above 12,136 would look bullish enough to warrant taking home a small short position. It's been so long since bears enjoyed a Sunday night massacre that maybe it's time.
I suggested early last week to tune out this vehicle -- advice that turns out to have saved us some stress. The futures oscillated nervously within a relatively tight range, paralyzed, if not by fear, then by uncertainty. Not much will be required to turn the futures into a runaway helium balloon, however, and this could happen as early as mid-week on growing perceptions that Trump will win. This notion could conceivably have gained critical mass by the time you read this on Sunday night, since Biden's campaign was taking on serious water when last week ended. Even if his now well-documented decades of graft fail to gain traction with the news media, he has enough other problems, including, most recently, voters in Pennsylvania, Texas and Oklahoma who heard what he said about killing the oil industry during Thursday's debate. The news media's disgraceful state of dereliction is not going unnoticed either, and it could gain millions of votes for Trump from Americans who are nauseated by the extremely biased coverage the campaign has received. My commentary (see above) provides yet another big reason why pollsters who have picked Sleazy Joe are growing more wrong with each passing day. Concerning the E-Mini S&Ps, if they vault the 3571.50 target shown in the chart, we can confidently infer that investors have caught a whiff of the coming Trump victory. ______ UPDATE (Oct 26, 9:34 p.m. ET): A 100-point decline might have been a worrisome sign for Trump, but bears -- and therefore Biden partisans -- had to settle for much less by the time short-covering kicked in after-hours trading. Let's see now whether sellers can get second wind. ______ UPDATE (Oct 27, 9;27 p.m.): A pullback to the green line would trigger a weak 'mechanical' buy, stop 3198.00. The trade rates
The usual geniuses have attributed last week's stock-market stall to growing fears that the Democrats could sweep in November. Any sentient adult watching the news, however, or video footage of Biden's dismal public appearances, understands why these fears are unfounded. Even so, they held sway over traders for most of the week, preventing the E-Mini S&Ps from reaching a 3571.50 target that should have been a lay-up. Bears could claim no great success either, however, and that's why we should stick with the target as the new week begins. Moreover, you can buy a pullback to p=3384.75 'mechanically', using a stop-loss at 3322.50. An rABC or 'camouflage' set-up should be used to pare the entry risk down to perhaps a tenth of that. ______ UPDATE (Oct 20, 5:20 p.m.): We'll back away for now, since the shallow stall just shy of early September's record-high is just courting anxiety.
The top of Friday's 39-point rally came within less than two points of the 3481.75 target I'd sent out the night before. If you got short up there as advised, set a break-even stop-loss for now and cover half if the futures pull back to 3473.00. I'll update my instruction if Sunday's opening is worse than merely weak. Alternatively, targets of a bigger, bullish pattern remain in play. They lie, respectively at p2=3478.13 and D=3571.50. Both are shown in the chart (inset) and, because of an adjustment to point 'A', are somewhat lower than the targets given here previously. ______ UPDATE (Oct 12, 6:26 p.m. ET): A strong, unpaused rally has made a potential short-term finishing stroke to D=3571.50 all but unavoidable. Short there aggressively with a tight stop-loss if you've caught a profitable ride up. _______ UPDATE (Oct 14, 6:55 p.m.): The at times maniacal upsurge of the last few weeks has in fact, and so far, curiously avoided a finishing stroke D=3571.50. This is mildly bearish on its face, but we should give bulls the benefit of the doubt, since the selling over the last couple of days has been quite subdued. This is no reason to give up hope that bears will roar before the week ends, but for now there is no reason to assume the weakness is anything more than a garden-variety retracement. Here's the picture. ______ UPDATE (Oct 15, 5:4 p.m.): Well, dear permabears, there is a growing list of reasons why you should give up hope, since you've accomplished precious little in three days. I've mentioned numerous times over the years that a trader could have reaped a fortune buying any downtrend on its third day. Further proof of this may come soon.
The December contract is all but certain to achieve the 3481.75 target (see inset), but it remains to be seen whether it can blow past it. You can try shorting there with a tight stop if you've made a few bucks on the way up or if you know how to use an rABC set-up to trigger the trade. 'Mechanical' set-ups have been working consistently, as you may have noticed, although the one that caught the low tied to Trump's recent flip-flop on a stimulus package was a bit hairier than we'd have preferred. If the futures settle above 3481.75 for two consecutive days or achieve 3488 intraday, they'll be signaling more upside to the p2 and D pivots of a larger pattern shown here. The respective resistances lie at 3488.44 and 3585.25.
