True Direction Revealed
Today’s session did not disappoint us; the bears failed overnight to go to the 2035-2037 support level as the 6AM hourly sticksaved at the key supports of 50SMA and 100SMA. Before the day session opened, we saw the possible cup and handle setup on SPX that had a 100% measure move to 2113 if it broke out.
When the day session opened, the market was already near yesterday’s HOD of 2063.50. Then, the range bound shakefest continued until the 2PM when the Fed minutes were released. At 2:15PM, we got the initial bull breakout bar that was sticksaved at the 15min 8EMA bull train support. Subsequently, it was 15minute bull sandwich setup with the next couple bars. By 3PM, the hourly candle closed as a large perfect bull bar breakout above the price channel resistance. Overall, the entire day session was just a 15min 8EMA+20EMA and 1HR 8EMA bull train that hit the immediate target of 2080-2085.
What’s next?
Daily closed at 2078.5 as a large bull engulf candle and above the 61.8% fib retracement. Also, it closed back above all the moving averages such as daily 8EMA, 20EMA and 200SMA.
Now, the true direction for the week’s trend has been revealed as we discussed in last night’s update that today was a turn date the market needed to break out of the shakefest range of 2067.8 vs 2041.33
The intermediate targets are 2092, 2100 and 2110 after a possible corrective dip back to 2070-2068 first. As we’re writing this, ES is trading at 2082 with the hourly extreme overbought signal about to be confirmed.
A corrective dip to 1HR 8EMA/20EMA would work off some temporary overboughtness. (Hourly extreme oversold/overbought signals that we've traded have an executed win rate of 80% over the years across various instruments).
However, the dip is not important – what’s important is that this is an accelerated 1HR 8EMA bull train that means every dip should be bought until 2060 gets taken out.
For bears: Must have a hard rejection tomorrow/overnight since the bulls are testing against the 78.6% fib retracement of 2086.34. A close above 78.6% would suggest a 100% retracement back to 2110.25 is in the works. Bears must break below 1HR 20EMA to derail the current bull train.
The Cup and Handle Pattern
For ES, the cup and handle 100% measure move targets 2128.50. The SPX cup and handle 100% measure move targets 2114, it’s relatively lower due to the ES Sunday gap low skew.
The Weekly Chart Potential within the Context of Monthly
Currently, the weekly chart is trying to form a bullish engulfing candle. This means that the weekly bull’s primary goal is to close high for the week. Ideally close at or above 2013 and then it would have a very bullish weekly setup to new all time highs. In the context of the monthly chart, August 2015 vs October 2014 formed a double bottom – this is the intermediate swing breakout bulls are looking for new ATH. Remember, the October monthly bar was a huge bull engulf that still gives the potential of a breakout the next few subsequent months as long as price stays above October’s half way candle point.
