In my recent momo update I was quite adamant about the increasing odds of a major market correction. Since then we’ve seen a further increase in spasmodic intra-day gyrations across the board, fueled by a mix of low participation bot trading, heightened emotions and a constant stream of contradicting market rumors (e.g. Deutsche Bank). The trading lair has been in defcon 3 mode for a while now which clearly affects our daily trading activities.
After over a dozen failures to reconquer the ES 2180 mark (Dec contract) technical resistance near that cluster is growing (see the NLBLs) and I expect every push higher to meet increasing resistance. Thus, I have now dusted off my bearish hat and am willing to consider short entries. Which of course doesn’t give me license to willy nilly jump into short positions. Instead my plan is to start selling the rips, as long as they meet selling pressure near technical resistance levels. On the daily that means 2165 plus minus a handle or so.
Our LT road map is increasingly coming into focus. Here 2180 is what separates the bulls from an almost obligatory happy X-Mas rally. Which obviously still cannot be ruled out just yet. As a matter of fact the longs are still officially running the tape and if 2180 is taken out I will be happy to buy every single retest that follows. But until then I will leave it up to the swing traders to play the bounces. We have held our own over the past few weeks but the comment section clearly reflects the current sentiment, which is one of exhaustion and confusion galore.
Fall Equity Roadmap
- The bulls are still in charge. Let’s not kid ourselves – just look at that monthly panel. A major spike higher cannot be ruled out but I would deem it a final exhaustion spike. Either way I expect us to trade significantly lower by spring of 2017.
- A push above 2180 hands the ball back to the longs and will most likely produce a rally into X-Mas.
- Between 2165 and 2180 (our weekly hurdle) I may consider long entries but will need to consult participation (see our invaluable Zero indicator – you should sign up).
- Until 2165 is taken out I will consider short entries near that level.
- 2006 is the bearish point of recognition. If it is breached the bears have a real chance to become the Grinch Who Stole Christmas.
- 2074 is where the bears take over – odds for continuation lower will increase exponentially with every 10 ES handles lower.
- Basically we currently are trading within a 100 ES handle information vacuum.
- If you have been reducing your trading activities it is time to start paying attention assuming of course you are comfortable playing the short side.