The short I detailed here yesterday never got close to triggering, but here's another: Get short if the futures fall to the green line, and use the red line (p) as a minimum objective. I have not specified prices for either Hidden Pivot level because the rally could yet exceed the pattern's point 'C' at 2905.75, creating a new 'C'. The trade is based on the so-called rABC, or reverse ABC pattern, popularized by my mentor, the late Ira Tunik. However, the pattern had significant limitations for purposes of analysis and offered less-than-stellar odds for the trader. I am experimenting, however, to determine whether rABCs yields better results if two very specific conditions are met. My suggestion in the meantime is to paper-trade rABC-based recs until you are confident using them. I invite all subscribers to share their findings in the chat room. Please do so VERY sparingly, however, so that the discussion does not become cluttered with poorly developed, drawing-board ideas._______ UPDATE (Jun 11, 10:32 a.m. ET): Based on the so-far 2911.50 high this morning, the 'CI' short would trigger at 2870.19, stop 2912.00. Yes, that's risking $2100 per contract -- not recommended as a trade-out-of-the-blue, but for those who are in and out of ES actively.
Today's chart is different from any I have presented here before because it emphasizes stochastic indicators rather than Hidden Pivots. The graph shows a potentially bearish divergence of price peaks relative to 'overbought' stochastic peaks. I say prospectively because the divergence would be negated if the futures were to rally above peak #1. In any event, the picture suggests that a very enticing 'counterintuitive' short could develop if ES were to turn down from a high close to, or even slightly above, peak #1. If the downturn trips a conventional sell signal at X, go short there with the goal of taking a partial profit at p (which remains to be determined). The potential for any downtrend from near these levels to achieve 'd' is significant, since the stochastic divergence would act as a kind of turbocharger. _______ UPDATE (June 10, 9:26 a.m. ET): The 'CI' short noted above would trigger on a drop touching 2856.50. This is based on C=2898.00, the overnight high. This is somewhat above A=2894.00, but that would not diminish the turbocharger effect or the attractiveness of the trade. A resurgence above 2898.00, however, would. Here's the chart, which notes that a quick fall to the green line would give the trade a better chance of working.
The 'counterintuitive' trade recommended for Tuesday triggered at 2787 and was showing a theoretical gain of $900 per contract shortly after the close. Because of the way the rally blew past the green line, it is an excellent bet to achieve a minimum 2846, the midpoint Hidden Pivot of the pattern shown. If you did the trade, I would recommend taking a profit on half of your position at these levels and using a break-even stop for what remains. Exit an additional 25% at 2846, then keep 25% for a potential moon shot to as high as 2963. At that price, the gain on any contracts still held would be $8800. Subscribers who hold a position should let me know in the trading room. I will provide tracking guidance if I hear from at least two of you who followed my recommendation. (Note: I also advised using the micro contract as an alternative during an impromptu online session held Tuesday morning.) ________ UPDATE (Jun 5, 9:18 p.m.): In the chat room just now, I have advised exiting any remaining contracts at a current 2817. The additional theoretical gain would be about $1500 per contract. I am skeptical that this rally will get much further, or that desperate hints of easing from the fraudsters at the Fed will carry the day. ________ UPDATE (June 5, 5:33 p.m.): A weekly close above 2846 would bolster the bullish case, which I've pegged to a 3095 target for the S&P cash index.
Friday's plunge came within six points of fulfilling the 2744.25 target we've been using to keep us confidently on the right side of the trend. This Hidden Pivot support seems all but certain to be achieved Sunday night or Monday morning, but the selloff could conceivably continue down to as low as 2732.50 if the support doesn't hold. At that level the futures would be in good position to set up a 'counterintuitive;' buy signal. I'd suggest tuning to the chat room at that time if you trade this vehicle. The extent of the bounce is unpredictable at the moment, but it would need to exceed 2842.00 before we start taking the rally seriously. _______ UPDATE (Jun 3, 12:30 p.m.): The futures have bounced eight points tonight from 2732.25, a single tick beneath the target given above. This is well short of the 2791.00 print needed to trigger a 'CI' trade, but if you simply bottom-fished with a tight stop-loss, you should have taken half the position off for a partial profit. In any case, you're on your own. _______UPDATE (Jun 3, 6:27 p.m.): Six hours of gratuitous swings lowered the CI trigger to 2787.50 but otherwise changed nothing.
The head-and-shoulders pattern shown implies the futures could fall at least a further 50 points in search of traction. It is a flimsy support, to be sure, created by an important low at 2726 recorded in early March. The suspicion grows that the ten-year-old bull market is over, but we've been there before and stocks have recovered every time. If a bear market has in fact begun, we should see it first in uptrending ABCD patterns that fail to reach their ' D' targets and downtrending (i.e., corrective) abcd patterns that overshoot 'd'. The first instance of the latter lies at 2744.25, a Hidden Pivot support that must evince a strong bounce if bulls are not about to get trounced. Concerning the rally target, I've proffered one at 3095 for the S&P cash index that has grown more distant and which now lies about 11% above current levels. This no longer looks like an odd-on bet, at least for the near term._______ UPDATE (May 31, 8:23 a.m. ET): An ESU19 target at 2747.00 is equivalent to the June target we've been using at 2744.25. Any lower would activate 2734.25.
The futures have tripped a 'counterintuitive' buy signal at 2830.75, implying that a rally of about 70 points is developing. However, these signals work best when the rally pops quickly to midpoint pivot -- in this case 2854.00. Instead, the futures fell slightly on Friday after hitting the trigger point. If they don't get a new burst of energy on Tuesday with leap above p=2854.00, odds of a major breakdown beneath the trendline (see inset) will increase. Bottom line: It'll be fly or die in the week ahead. ______ UPDATE (May 28, 4:30 p.m. ET): The futures broke down late in the session, but not before providing bulls long from 2830.75 with an opportunity to exit for a quick profit of more than $500 per contract. Now they are destined to fall to at least 2783.25, a Hidden Pivot support that must hold if bulls are to escape a sixth straight week of declines. Here's the chart.
The rally would need to continue for at least a couple more days before it becomes mildly persuasive. I'd suggest setting an alert at 2899.50, since that would generate a robustly bullish impulse leg on the hourly chart. Although I recommended a mechanical buy on Monday at 2821.25, only a couple of subscribers reported doing the trade, one of them by substituting SPY options. I'm not going to establish tracking guidance for this position, although I will continue to provide informal updates here and in the Trading Room. There was $4750 per contract at risk initially, and that's why I suggested paper trading this one. To the extent it works, it should increase your confidence in 'mechanical' trades while diminishing your reluctance to pull the trigger on one. In the meantime, I've advised subscribers who were in the trade to take half of the position off near 2838, for a theoretical gain of about $850 per contract. The swing-for-the-fences target is 2910, or possibly even 2995. At the higher number, a two-contract position would show a theoretical profit of about $18,000. _____ UPDATE (May 16, 4:06 p.m.): Buyers narrowly missed our bullish benchmark at 2899.50, but they are likely to try again as the week draws to a close. The 'mechanical' long position is still live, and I'll now recommend exiting one of the two contracts that remain at 2917.75. ______ UPDATE (May 19, 10:16 p.m.): Exit another contract at current levels, around 2868.50, for an additional theoretical gain of around $1500. The futures feel leaden, so we should stick with 2899.50 as a bullish benchmark. _______ UPDATE (May 21, 9:03 p.m.): Zzzzzzzz. _______ UPDATE (May 23, 8:32 a.m.): Index futures have gotten pummeled overnight. This one should continue falling to at least 2815.75 before reversing. Here's the chart. _______
If last week's tortuous, ratcheting downtrend is the best that sellers can do with a collapse in trade talks to help them, then we should take Friday's bullish finishing stroke as a valid 'buy' signal. I'd written here earlier that a failure to produce an agreement between the U.S. and China would not be bearish for stocks, but instead prove to be a case of sell the rumor, buy the news. If this is so, and barring the always-possible Sunday night surprise, we should see the futures push above p=2910.75 (click on inset) on Monday or Tuesday. A subsequent pullback to the green line from our sweet spot between p=2901 and p2=2953 would trip a 'mechanical' buy signal. _______ UPDATE (May 13, 6:35 a.m. ET): Overnight, the futures have given up two-thirds of the very substantial gain they achieved via Friday's explosive short squeeze. If DaBoyz have to take the futures down by 40 points just to dry up sellers this morning, stocks are in worse shape than I'd thought. The rallies have become almost too scary to short, but also too fleeting to distribute. That's dangerous. Our best bet -- effectively against sanity, and still reasonably priced -- is VXX calls. _______ UPDATE (May 13, 11:23 a.m.): The buy triggered at 2821.81. The implied initial risk per contract, using a 2726.00 stop-loss, is $4750 per contract, or $19,000 for a four-contract position. Best to paper trade this one to see if it works. If so, it should add to your confidence in mechanical trades in general. _______ UPDATE (May 14, 10:48 a.m.): If you took a position with real money as some subscribers appear to have done, book profits on half near 2838 -- $850 per contract at the moment -- and use a break-even stop-loss for what remains.
Sellers exceeded the 2865.75 downside target shown, implying they are not yet done. The overshoot was just 3.25 points, but that's sufficient for us to infer that the rally is corrective and therefore, at some level below 2938.25, an opportune short sale. Granted, there's room to raise the point 'A' high a tad to produce a lower 'D' that would have precisely contained the selloff. But the one I've used is too clear and compelling to ignore, and that's why I am relying on it to give me an accurate read on the dominant trend. Alternatively, however, and just in case, a thrust above C=2938.25 would be warning bears to dive for cover. _______ UPDATE (May 9, 8:06 a.m.): Weakness overnight has put a 2831.50 target in play. There's potential for a 'mechanical short' to materialize if the futures rally to x=2882.50 (stop 2900.00). Here's the chart. _______ UPDATE (May 9, 2:21 p.m.): The relapse amounted to a very nasty 50 points. Shorts panicking to get 'em back have reversed the selloff from 2836.25, five points shy of my target, recouping 70% of the day's losses so far. I am skeptical about this rally but would become a (temporary) true believer again if it hits 2930.75. This is a tick above an interesting 'external' peak on the hourly chart.
Remember: However nutty price action gets, it's all just impulse legs. Two tariff-related downdrafts within the last 24 hours have produced the tradeable pattern shown (click on inset). There are two ways you can play it: 1) bottom-fish at p=2905.25 with a bid a tick above that midpoint Hidden Pivot, stop 2903.75; or 2) get short at the green line 'mechanically' if the trade sets up exactly as shown. You'll be on your own if either order fills, but you should take a partial profit on half the mechanical short if it falls to the red line at 2905.25.
