8EMA Bear Train Acceleration Phase
Today’s session was an extraordinary display of prowess bythe bears as they hit intraday support targets again and again. The action really started from last night when the bulls broke higher vs. Tuesday’s high of 1940.25. We discussed the mini bull/deadcat bounce target extension was at 1950-55. (Remember, the bull targets were extension targets and not immediate targets as explained last night.)
The context and mental game plan from last night we had going into today’s session was for the bulls to hit the 1950-1955 target area then look for the swing bear train shorts re-entry. If you recall, last night’s daily 8EMA major resistance was hovering around 1953 and the daily swing shorts re-entry was likely going to be there. Fast forward, when the day session opened the market quickly topped with lower highs and dropped to retest the 1934~ 1HR 20EMA support. At this point, the setup for 1950-1955 was still possible as long as it holds above 1931-1932(overnight lows). However, the support was quickly broken and the setup invalidated shortly after which meant we had to be stopped out of our scalp longs. The next support was at 1923~ 1HR 50SMA and the chart indicated we had to quickly switch our stance from bull to bear. Even though our initial plan was to short 1950-1955 swing for 1892-1900 support, it never materialized as the market topped a few points before our game plan’s optimal entry.
At around 10:32AM, we noted of the 5m 8EMA bear train setup and it was confirmed by 11:05AM with the hourly bear train setup that had an initial target of 1910 from 1927~. Long story short, the bear train quickly opened up the next intraday targets of 1905.75, 1899, 1892 when 1910 was broken as the train accelerated and extended beyond the initial target. Then, if below 1892 it opened up the daily support targets of 1880, 1865, 1850 and 1831 from the weekend report.
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The point we're trying to make here is that you have to keep training yourself to be able to adjust your own pre-determined plan (in this case, shorting 1950-1955) accordingly as the market conditions/dynamics change and new opportunities present themselves. It also did not help that we had to leave the office for an hour from 1:30-2:30PM~ and thus we missed a lot of the “easy money” riding the bear train. Even for us “seasoned” traders, it was really hard to execute the new game plan while having an ingrained one from the previous night. We actually didn’t do well today as we struggled and made a few rookie mistakes such as order typos. We hope that sharing this play by play, it might be able to help some of you out there.
What’s next?
Daily closed at 1883 and the bulls got rejected by the daily 8EMA bear train. If you recall from last night’s report, the market was in a complicated phase with the hourly mini bull train/deadcat bounce battling against the daily + weekly bear train and today’s session and it was imperative to understand the timeframes. Today’s session displayed and proved that point to perfection as the daily bear train entered into another acceleration phase. This daily 8EMA acceleration is similar to the October-November 2015 rally, the bulls were sticksaved 4 times consecutive at the 8EMA. Currently, we count this bear having 3 sticksaves at daily 8EMA since January 4th, 2016.
This is a bear train until price proves otherwise (same as weekend stance). However, there may be a temporary bottom forming here because our hourly extreme oversold “A+ Tier” signal confirmed at 8:37PM tonight. The signals targets 1914.50 and 1924.50, as “A+ Tier” are usually 40-50points off the low/high. It invalidates when a 5minute candle trades below 1870. If this signal fails, it would most likely try to confirm again at 1865 or 1850 based on current circumstances. We have a tiny long position from ES 1878 as this is a judgement call* based on the bear acceleration phase.
The previous “A+ Tier” signal worked well on Sunday Jan 10 as our weekend report indicated the major support area of 1892-1900 as a possible temporary bottom. The signal confirmed itself around 8PM that night and provided a 35 point bounce from low to overnight high.
The Judgement Call*
The crucial thing to understand is that daily+weekly are bear trains and the bears just initiated the daily 8EMA rejection today so it’s more likely that they get follow through tomorrow based on historical data on acceleration phases. This is the main reason for the tiny long size instead of our regular size as we do not think this deadcat bounce could go hit the 1914.50 or 1924.50 targets before heading to 1865/1850 first.
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Overall, any bounce is just another short opportunity for us as long as this remains an accelerated 8EMA bear train. It is what it is, keep it simple.
Levels from the weekend report: the next major supports are located at 1865, 1850 and 1831.
