E-Mini S&P

With the futures in record-high territory, we want to remain alert to even the slightest directional changes, since this would be such a great place for Mr. Market to spring a wicked bull trap.  The clearest pattern we have to monitor the subtle interplay between bulls and bears at these levels is the one shown. It points to a potentially short-able top at 2125.50, although a move to that Hidden Pivot would not become likely until such time as its sibling midpoint pivot at 2114.25 has been decisively exceeded. There are potentially at least three trading opportunities here: 1) a 'mechanical buy' at 2114.25, stop 2110.50, after the futures have traded decisively above the red line (i.e, by ascending into the approximate range 2118.00-2120.00);  2) a 'camouflage' buy once p has been exceeded even slightly; and 3) a short from 2125.50. The last trade is recommended in particular to those who have made on the approach. _______ UPDATE (April 28, 12:20 a.m.): It is short-term bearish that the futures couldn't even rise to the challenge of reaching the modest rally target at 2125.50 given above. However, bears seemed to have little more energy, since they couldn't sell off this brick to 2097.00, the most immediate Hidden Pivot support below. If Apple can't improve on Monday night's performance, however, we might see bears put more than a little more energy and enthusiasm into the task today.

The futures did all their correcting before the opening bell, allowing DaBoyz to short-squeeze the S&Ps on thin volume back up to an important trendline that has seen a lot of action in the last few days. The overnight low at 2080.25 occurred a single tick from the target shown in the inset -- and notice that it did not even fill the gap left by Monday's short squeeze. The fact that it occurred when most traders in the U.S. were still sleeping demonstrates that it's hard to make money working this vehicle even when you know exactly where it's going. With all the head-butting lately, it seems unlikely the futures will simply relapse into a funk. Instead, look for a pop to a new all-time high at 2121.00, a fetching minor Hidden Pivot target. Getting long will be catch-as-catch-can, but night owls should keep in mind that the breakout above Tuesday's highs and the trendline would stir up hysteria that can be easily managed -- and leveraged -- via the 'camouflage' technique. Stay close to the chat room if you want to learn how. ______ UPDATE (10:41 p.m.): The futures got more than halfway to 2121.00 yesterday with a thrust to 2114.50 intraday.  There was no mention of my target in the chat room, so I'll assume no one took advantage of it. It remains nonetheless as a logical minimum rally objective for the near term.  If it is easily exceeded, that would be bullish for next week.

Yesterday's failed rally was not quite the failure it may have seemed.  Notice, for starters, that it pushed just past a trendline that had contained bulls since February.  Of possibly greater significance is that the peak also slightly exceeded another at 2104.75 that was recorded last Thursday. That makes Tuesday's fleeting thrust bullishly impulsive while also implying that the weakness that has ensued will probably turn out to be a consolidation. If we are patient, we should wait for the pullback to fill the small gap circled in red. Even better from a trading perspective would be a retracement that comes down almost to the low I've labeled point 'A'.  Many bulls would be discouraged at that point, presumably lightening the burden of the next rally. I've sketched this possibility with a hypothetical C-D leg that could offer us an excellent opportunity to get long with relatively little risk.

Yet another gratuitous swoon has moved the futures to within spitting distance of new all-time highs. I'll be mildly surprised if they get there this week, since one reason for Friday's sharp decline in the broad averages -- punk Q1 earnings -- will take at least a few weeks to recede from concern.  Under the circumstances, the E-Mini S&Ps are best viewed at the moment as a day-trading opportunity, too risky to carry overnight as a buy-and-hold -- or to short-and-hold, for that matter.

Current touts for DJIA and DIA take note of a trendline well below current levels, but we can use this vehicle for a more finely nuanced picture.  If the broad averages are ready to turn around well short of the line, we should see the E-Mini S&P's hourly chart reverse from the midpoint support of a pattern similar to the one shown (see inset).  Also, if the midpoint occurs anywhere along the middle third of the b-c leg, it could be bottom-fished with a stop-loss as tight as 3-5 ticks. _______ UPDATE (10:54 a.m.): No correction of significance occurred. The futures' biggest pullback overnight was a measly  6.50 points, and that came from an interim high of 2089.75! At the moment, nearly 90 minutes into the regular session, bulls are on a wilding spree, with ES up 18 points.

A mechanical buy of yesterday's pullback to p=2093.00 (see inset) would have produced an easy gain of as much as $600 per contract. The low of the correction was 2089.00, two points above the 2087.00 price at which the trade would have been stopped out.  Looking ahead, the 2110.25 rally target we've been using this week is still viable in theory, but getting to it has been such torture that there is reason to doubt it will be achieved straightaway.  In any case, if you've caught any of the rally, use it to cushion the stop-loss on a short from 2110.25.  The by-the-book stop would be 2111.25, but I'd suggest using camouflage instead, since this pattern doesn't look quite gnarly enough to reliably deliver a target within two ticks.

Today's chart is a composite weekly that shows the entire bull market, going back to 2009. You don't need a degree in technical analysis to see that it has gone on for long enough to be considered mature. On the other hand, the average bull market lasts 97 months; this one is only in its 74th month. From a purely visual standpoint, however, it lacks a dramatic ending. Look at the price action since December. Stumbling and bumbling its way higher, the S&Ps' tortured ascent clearly suggests a topping process, but not an actual top.  More visually satisfying would be a collapse following a bold leap to record heights. At that point, the last bear will have been gutted and disemboweled, and everyone else would be crazy bullish. I can think of a dozen good reasons why the bull market should end here and now. Lately, it has looked like hell, and even Apple, a key bellwether, can't seem to make much headway. What I expect, however, is not an anticlimactic end to the bull market such as would occur from these levels, but rather a scary plunge that would turn almost everyone bearish. And then, finally, the coup de grace: a final, spectacular rally to new highs that would trap bulls and bears alike -- trap them so badly that even financial geniuses who were half-ready for it would find no exit. Waiting for this scenario to play out will probably require more patience than I've got. Also, more courage and conviction, since a scary decline from these levels is going to seem like the real deal. Europe will be sliding into full-blown Depression, China's investment bubble will be imploding, and American consumers will be completely tapped out. Could one last rally evolve from such psychological depths?  We shall

The dive into yesterday's close was steep, but the futures were a 'buy' at the close nonetheless if you take your mechanical trading seriously.  From a technical standpoint this is so for two reasons: 1) an aging, 2104.50 rally target that was narrowly missed yesterday remains theoretically viable; and 2) the futures have pulled back to our 'sweet spot' -- a midpoint pivot that could be bought with the same 2078.00 stop-loss we used to get aboard on Friday.  Since that trade went on to produce a theoretical gain of $800 per contract, I'll recommend using $300 of your new lucre to do it again. If you did NOT do the original trade, you can still try entering near 2084.50, but using a 'camouflage' strategy that would effectively cut entry risk to five ticks ($62.50) or less. Night owls can use the 3-minute chart to identify an uptrending ABC pattern that might serve that purpose.

The trade-entry tactic that I sketched here last week has worked perfectly, producing a stress-free theoretical gain so far of about $550 per contract if you followed my simple advice. Traders were to have executed a mechanical 'buy' on a pullback to a 2084.50 midpoint pivot, using an implied stop-loss at 2078.00 that was equal to a third of the potential gain. As it happened, the 6.50-point stop-loss was unnecessary, since the pullback came down to exactly 2084.50 and went no lower. If you bought there in the way that I'd detailed graphically, you should take a partial profit on half the position near these levels, holding the rest for a shot at the 2104.50 rally target we've been using since last Wednesday. This gambit was intended for traders of all levels of experience. It was particularly do-able because the pullback to 2084.50 occurred, not in the wee hours, but smack dab in the middle of the regular session. Check the chart that accompanied the previous ES tout (archived) to see whether you could have followed my instructions. _______ UPDATE: This flying pig made it only as high as 2101.25 before relapsing 15 points. The mildly failed rally demonstrates once again that there is something seriously wrong with the ostensible health of the bull market.  If you were long all the way up (i.e., from 2084.50), a 'dynamic trailing stop' would have taken you out at 2100.00 for a theoretical gain of $800 per contract.