Wednesday, January 27, 2016

E-mini S&P 500 Futures: Keep It Simple Stupid


The Shakefest Continues

Today’s session was similar to any other Fed day where price gets tested at both the range high and range low. During the overnight session, the bulls defended the upper support and did not even let the bears retrace back to the 1875-1869 area as we thought it would before the blast off. When we woke up and saw the overnight price action, it gave us more confidence the market is going to hit ES hit daily 20EMA target today.

During the day session opening hour, the bears tried to retest the overnight low and attempt a breakdown but quickly failed as the bulls managed a nice 5m bull engulf candle.  We entered longs at 1886 with an initial target of 1894 and the bull train quickly took off as we had a target extension to 1920 which was a roughly 5 points under the daily 20EMA at the time. We trimmed and trailed while riding this accelerated 5m 8EMA bull train up. However, the bulls couldn’t sustain the 1907.5 breakout and got rejected at 1910 and turned back to 1900 really quickly. Remember, the 1907.5 level is the Jan 19, 2016 high that we discussed last night and bulls needed to power through that in order to get to the daily 20EMA.

Fast forward to the 2PM FOMC announcement, we had a micro double top rejection that bears needed follow through below 1885 for the flush setup vs. bulls needed to reclaim 1895 in order for them to have a chance for the daily 20EMA target. Once the 1885 support broke and bears continued their assault below the overnight low of 1878.75, it opened up the immediate targets of 1869, 1858 and 1852.

What’s next?

Daily closed at 1878 and the market is still inside the shakefest zone of 1907.5 vs. 1851.25. The daily context is still a temporary basing pattern with major resistance at 1907.5 and the 20EMA that’s grinding down.

The weekly bear train is waiting for the shorts re-entry at 1920-1940 or when the market breaks below 1851.25 with immediate follow through below 1836.25 to indicate that the swing bears are back in full force. You have to remember that the Jan 20 was just a temporary bottom as we discussed before and the higher timeframe context is still bearish. Until major resistances such as 1940 and 1950 get decisively taken out, this is still swing bears’ fight to lose.

The monthly candle closes in 2 days as well; swing bears may want the bulls to sticksave back to 1920-1940 and close there. The reason is because a large monthly large bottom wick candle is generally unsustainable so in February/March the bears may get the chance to retest the prior supports based on the lower highs pattern.

There are currently no immediate targets or high probability projections. However, our best educated guess/bias favours short-term bulls as they try to retest the resistances and breakout based on the higher lows triangle setup. Our general roadmap is 1880->1920~ (daily 20EMA) ->1870 and it’s subject to change based on the overnight action. Remember, the market is just fluctuating from range high vs. range low defined by our “shake zone” levels. We’re looking forward to next couple weeks as the market gets out of this shake zone so we get some easy trending moves riding the train.