8EMA Bear Train Acceleration Phase Part 2
Thursday Jan 14’s day session was fascinating as the bears
tried to breakdown by forming a marginal lower low at the open. Immediately
afterwards, the 30min candle was a bull engulf which created the massive
feedback loop that had targets back to 1924 from the 1895 breakout level.
Basically, it was just an “easy money” day trading countertrend to the bigger context
of the daily 8EMA accelerated bear train. In the night session, the bears from
the daily 8EMA bear train stepped in and had another short re-entry as 1HR
20EMA broke then rode it back down to the 1865 and 1850 major support (levels
from the Wednesday’s KISS report) by Friday’s lunch time. Overall, last week
was a simple, effective and methodical bear train in terms of risk vs. reward that
had no surprises.
(We couldn’t write
the Thursday update as we were in a meeting)
What’s next?
Friday closed at 1876.5 with as a 8EMA rejection and bottom
wick. This means that the 8EMA accelerated bear train is still ongoing but
Monday is most likely going to be an inside day based on the bottom wick and
MLK half day schedule for globex trading. (Stocks are obviously closed)
The hourly extreme oversold “A+ Tier” setup was confirmed on
Friday at 1855 which targets 1895 and 1905 with an invalidation level under
1850. This means that our immediate targets are back to 1890 and 1900 within
the context of daily 8EMA bear train shorts re-entry mode.
Nothing has changed in the daily context:
Remember the Wednesday report: 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.
Weekly + Monthly Chart
Perspective (Rant alert, proceed with caution)
On the forums that we frequent, it seems that “everyone” is
starting to become really bearish in the long term (3-12months out) based on
the last two week’s action. It’s hilarious because we really don’t understand
what the fuss is about since ES is still above 1831 which is the August 24 2015
low. Even if it breaks below 1831, we have massive major support next at 1813
and 1775 on the weekly and monthly timeframes. Well the market at least needs
to break below 1831 first so the bears can prove that they have momentum going
and this current correction has more downside targets ahead. Our point being,
there are still two weeks for the monthly candle closing and that bears still
need to prove themselves in the larger timeframes of weekly and monthly.
In other news, at the start of last week the market fulfilled our double top 100% measure move with a low of 1893.5 vs. the 100% measure move at 1891.75 target. Then, it made a deadcat bounce as expected based on our key 1892-1900 support area and hourly extreme oversold “A+ Tier” setup. The daily bear train is trading very methodical at the moment and does not have any massive breakout/breakdown setups like the one we warned about in late July 2015 before we went on vacation. Recall, the 8 months worth of consolidation during Feb to Aug 2015 between ES 2134 vs. 2034, this provided a massive feedback loop of trapped traders. Break either of those levels and you would likely have an easy money breakout/breakdown. Obviously, that feedback loop exceeded our initial expectations by 100 points as the original measure move was just 100 points from 2034. At this point you’re thinking what the heck are we talking about? Well, we’re just saying it’s important to approach the market level by level and not let the emotions get the best of us.
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Weekly has been below 8EMA and 20EMA since the Jan 8 weekly candle closing. It has a potential breakdown pattern setting up if 1831 gets taken out with follow through under 1813. Then, there’s massive support at 1800 and 1775 if that happens. However, remember the context of the weekly and monthly timeframes is that we’ve been trading in an 1800 vs. 2134 range for 3 years. This means that the weekly bears must first break below 1831 to confirm bear train momentum that the 1813 so that 1800 and weekly 200SMA at 1777 becomes possible. Until that happens, visiting this range low is just another great risk vs. reward BTFD zone for the intermediate bullish swing traders assuming the rangebound channel continues.
Some of you may be thinking the weekly and monthly charts
also show a potential triple bottom pattern which statistically don’t hold
well. Remember, the market could continue the range as long as it likes and
that is exactly why we like to approach it level by level. At this point, some
of you may think we are “permabulls”, but in reality we really don’t care if
the market tanks or rallies hard in the long term context.
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Monthly chart has a 3 year rangebound market context vs
“hold half and go” setup. Bears really need to break below 1831 first or keep
the deadcat bounce below monthly 20EMA 1974~ in order for the long term bears
to continue the potential bearish breakdown setup. Remember, there’s still two
weeks left for the monthly candle close so do not be misled.
