I sense a melt-up is coming, and soon. Bulls face just one significant obstacle in their quest for new all-time highs: the 4472.00 'external' peak recorded on September 27. Once above it, the old record at 4529 would turn magnetic, drawing the futures higher without seriously taxing buyers; short-covering bears would do all the work. Alternatively, a moderate fall could tell us whether this is likely. Specifically, if sellers drive ES down to the 4314.50 midpoint support of this pattern, an easy penetration would suggest bears are in charge, at least for the time being. It could also set up an enticing bottom-fishing opportunity, since we would be using a very tight stop-loss that anticipated a turn from 4314.50 exactly, give or take no more than a point or two. _____ UPDATE (Oct 11, 8:45 p.m.): So far it looks more like a nascent meltdown. Price action is too nutty in any event to be worthy of our serious attention or even speculation at the moment. _______ UPDATE (Oct 14, 7:54 a.m.): Apologies for the belated update, since I emphasized in commentary that went out Sunday night that this ostensible 'bear rally' is going to new all-time highs. As I also mentioned, DaSleazeballs running this carnival midway show are accomplishing this with short-squeezes in the dead of night, when there is almost no selling pressure. This allows a 'fake' rally to keep on chugging while using up almost no bullish buying power. String together enough phony rallies that surpass previous peaks with stealth rather than power, and eventually you are talking about the real thing, a melt-up.
ES moved more or less according to forecast on Friday. Although I'd touted an avalanche as likely, for scalping purposes I also proffered bottom-fishing guidance in the chat room that caught the intraday lows in QQQ, DIA and ES within a tenth of a percent. I'd intended to trade for a bounce, and that is still what I think we are seeing notwithstanding its seeming power. In Hidden Pivot terms the rally is still a relative weakling, having exceeded just two of six 'external' peaks on the hourly chart. Although we shouldn't presume too strongly against a waxing rally, bulls should still have to prove their case one peak at a time before we resign ourselves to new record highs. (That would not make me more bullish, for reasons I've explained in the current commentary concerning IBM's head-fake in 2009.) For now, use the 4224.75 target shown in this chart as a minimum downside objective. It will remain theoretically valid until such time as C=4469.50 is exceeded. A rally to the green line (4408.31) would trip a 'mechanical' short, stop 4470.00, but I am recommending this trade only to Pivoteers who know how to cut the $12,000 entry risk on four contracts by 90% or more using a 'camouflage' trigger. However, pending a possible tone change Sunday night, your trading bias should be bullish if you can handle entry signals on the sub-hourly charts. _____ UPDATE (Oct 4, 4:28 p.m.): Yet another timid showing by bears, this one failed to take out Friday's low. String together enough such failures and bulls eventually will seize the advantage. Monday is typically their worst day to scare up a bounce, but the herd looked poised nonetheless for a 'turnaround Tuesday'. ______ UPDATE (Oct 5, 5:20 p.m.): Bulls turned things around with a vertical
A manic two-day short-squeeze from Monday's bombed-out lows met heavy supply on day three, thwarting bulls who may have hoped to get it all back before the week ended. Layers of stock from the previous week's heavy chop remain solid and thick, and there's no telling how quickly, or even whether, buyers will chew through it. But if they do and it requires less than the five days it took to pour the concrete circled in the chart (inset), that would imply new all-time highs are coming. We'd have to respect the trend at that point, but not necessarily the seemingly crazy idea that the bull market is headed much higher. _____ UPDATE (Sep 28, 4:53 p.m.): Bears turned docile midway into the session, failing to convert a promising selloff into a bloody rout. They'll have another chance, probably soon, but it could require a nasty rally first to crush short-covering chumps who are preventing a memorable collapse commensurate with the bull market's extraordinary excesses. ______ UPDATE (Sep 30, 6:15 p.m.): It looks like the jig is up for the sleazeballs who have been short-squeezing stocks every night on zero volume, since even the dumbest, most panic-sticken bears aren't going to fall for the same, stupid con four nights in a row. Stocks reversed today off Wednesday night's phony waft and closed on the low of the day. Incredibly, there are apparently enough suckers around at 6:20 p.m. to levitate index futures slightly into the black, but the supply of them is about to dry up. Look for real carnage on Friday, of the sort that leaves investors fearful over the weekend. I will be bottom-fishing in the discomfort zone nonetheless, but only for a high-leverage scalp-trade with penny-ante risk.
Friday's closing bar ruptured the 'D' support shown, suggesting the December contract will grope its way lower in search of a temporary bottom. The week was hard on bulls and bears alike, but it is the latter who seemed to have gotten the worst of it. This suggests to me that the stock market is building a major top, a point of emphasis here over the last month or so. The actual bull-market high may have occurred two weeks ago when the December contract hit 4549.50, but there are too many bears that I respect who agree for me to be confident it's going to be that easy. My hunch is that index futures will open with a thud Sunday evening, and I am publishing this tout a couple of hours earlier than usual in order to put that prediction to the test. For a bigger-picture view of a 4503.50 bull-market target that has been very slightly exceeded, check out the chart and commentary accompanying the latest The Morning Line. _______ UPDATE (Sep 20, 1:16 p.m.): The futures have fallen into a gap between major lows recorded, respectively, at 4339.75 (Aug 19) and 4215.00 (7/19) that is too big to extrapolate a high-odds low. When the turn finally comes, we can assess the underlying bullishness/bearishness of it based on its location relative to the two lows. In any event, the impulse-leg idea obtains here: The farther the collapse goes without an upward correction, the more bearish. ______ UPDATE (10:36 p.m.): The bounce came from roughly midway between two lows, the second of which was a compelling one-off. This suggests it is doomed, but that we shouldn't try to intercept it too aggressively. Let's see what the first bear rally in more than 12 years looks like before trying anything fancy.
This was the worst week the S&Ps have seen in a long while. They looked so enfeebled, actually, that bears for a rare change acted unthreatened by the rallies. Half-hearted upthrusts repeatedly failed, and even the impulsive head-fakes showed no follow-through. In the end, with a steep, downward finishing stroke ahead of Friday's closing bell, the futures created a robustly bearish impulse leg on the hourly chart. Although Pivoteers can try bottom-fishing in the discomfort zone near 4410, my expectation is that the December contract will grind lower, seeking support from the August 19 low near 4340. ______ UPDATE (Sep 14, 1):55 p.m. ET): The jagged downtrend looks like no other that we've seen for years, suggesting something has changed. When was the last time the S&Ps declined for four straight days? That is one reason the pattern is so unusual. However, bears have gotten the worst of it, since the rally spikes all the way down have exceeded the incremental gains from any short position held from one low to the next. This is nasty price action, but bears may be tested even further before they get a two- or three-day freefall to enjoy. _______ UPDATE (Sep 16, 8:55 p.m.): Bears have been getting brutalized by short squeeze rallies that have been too fleeting to go anywhere, but too vicious to endure. If they lose again on Friday, DaBoyz will be in good position to pop this hoax to new record highs next week.
Just because the futures topped Friday almost exactly where we'd expected doesn't mean the rally is over. It will be, eventually, perhaps even in our lifetime. But odds favor more upside most immediately to at least D=4413.75 (see inset) before buyers take a breather. I'm down with getting short there, but let's at least try to make a few bucks on the remaining 50 or so points to the target. This will require close attention to the intraday charts, since there can be no true impulse legs on the daily chart when the averages are making new record highs. To keep things in perspective, especially for hopeful permabears, the September contract could plunge to the red line (p=4216), and be none the worse for it -- be a fetching 'mechanical' buy, actually; or even to x=4118 and still look bullish. _____ UPDATE (July 13, 10:13 p.m.): A promising 'mechanical' long triggered late in the session off this pattern, but I did not sanction it because it promised a long night for bulls. This was irrespective of whether one's goal was the red line (not recommended), or just a nominal profit. True to the forecast at the time (in the chat room), the futures stopped out the intraday low before embarking on a so-far weak rally that is break-even at the moment. _______ UPDATE (July 14, 9:31 a.m.): After bottoming out in the dead of night, the September contract has miraculously rallied to the red line, producing a profit of $3600 for anyone who boarded four lots 'mechanically' yesterday afternoon at x=4359.75. I'd suggest exiting at least half here while noting there is probably more profit left in the trade, since the phony JPM/GS shakedown is spent. D=4413.75, our old friend. _______ UPDATE (Jul 15, 5:39 p.m.): The weakness is becoming
There are unfulfilled rally targets at 3769 and 3802 that have kept us confidently on the right side of the trend regardless of news or mood swings. More immediately, however, last week's powerfully impulsive price action has created a lesser, bullish pattern with a 3727.50 target that is all but certain to be achieved, probably by no later than Wednesday. A tradeable stall at this Hidden Pivot seems likely, and I am therefore recommending a tightly stopped short to anyone who has made money on the way up. As always, an easy move through a target implies the trend is likely to continue, usually after a correction. _______ UPDATE (Dec 8, 5:03 p.m.): Time to start paying attention, since the futures are closing on p=3728.00 (slightly adjusted from above), the first place where a major trend failure could occur. Although I still believe the somewhat higher targets for the larger pattern cited above will be achieved, you can attempt a very tightly stopped (i.e., 1.25-2.00 points) short at 3728.00. Here's the chart, and although it lacks a one-off 'A', the pattern otherwise is quite appealing. _______ UPDATE (Dec 9, 7:52 p.m.): The futures traded no higher than 3715, so we were unable to squeeze off a short on our terms. The downdraft created an impulse leg on the hourly chart, but let's give it a day to see what bears can do with it. _______ UPDATE (Dec 19, 5:52): The selling turned gutless on day two and is struggling to reach a 3630.25 downside target. If DaBoyz can squeeze this hoax above 3681.25 overnight, they will likely be in charge as the week comes to an end. Here's a fresh chart that shows everything. _______ UPDATE (Dec 11, 9:55 a.m.): The 3630.25 target came within two points of nailing a
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.
