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

Let the Fed Games Begin

Today’s session was fairly simple as it was just a continuation of yesterday’s bull sticksave at the 1985 support level along with the hourly extreme oversold signal confirmation. The overnight session sticksaved at the 1HR 20EMA support and had a huge bull engulf with the 3AM candle that made a higher high of 2024. That pretty much sealed the deal as a double confirmation for the immediate target of 2030-2035 from last night’s report. Before the day session had opened, the immediate target was fulfilled and our extension target was at 2047.

During the day session, the morning consisted of consolidation and the standard 15m 20EMA bull sticksaves that eventually fulfilled the 2047 target around 1PM. Remember, our standard margin of error is two points for ES.  We then initialized a swing short at 2042 and 2045 for the next target of 2017-2022 with a hard stop at 2054. Overall, it was a boring session for those that did not have positions overnight as it was just a huge gap up and consolidated.

What’s next?

Daily closed at 2037.5, this is back above the 100SMA but still below all the other moving averages.

The immediate target from last night and the intraday extension target were both fulfilled, but our stance still remains the same. We are treating any bounce that remains below 2054 as a deadcat bounce and the intermediate roadmap is still looking for the double top confirmation with a daily close below 1998.50.

Currently, the immediate target is back to the 2017-2022 support by 12PM tomorrow.

However, tomorrow is also a Fed day so most likely there will be a huge price swing after the 2PM announcement.

Our current plan is to trade from 8AM to 11AM tomorrow then sit back and relax for 3 hours of a possible 5 point rangebound shakefest to frustrate new traders. Afterwards, see how 2PM shakes out and look for a high probability trade or just skip the day after 11AM. A lot of the successful day traders we’ve spoken to either reduce their size in the afternoon or cease trading altogether to avoid being shaken and trapped by the wild whipsaws. This is also known as one of our strategic holidays that we teach our beginner students.

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May the odds be ever in your favour :)

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

Bear Train vs. Deadcat Bounce Part 2

Today’s session was predictable and cruel. The Sunday open rallied into an overnight high of 2019.50 followed by a 1HR 20EMA rejection which is the standard characteristic of a bear train. Picking bottoms is very hard even with the help from our hourly extreme oversold signals. By 7:15AM, the market broke below Friday’s low which meant that the immediate targets of 1985 and 1970 were in the works when the day session opens in a couple hours.

Why do we say it was predictable and cruel? At the day session open, the market quickly went for a 1HR 20EMA resistance that was rejected and at 10:16AM there was this massive 15 point 1minute candle that engulfed the previous 2 hours only for it to close as a huge top wick. This was very cruel for the bulls that had buystop orders above the 2010-2012 breakout point as the candle’s high was 2014 so all those orders were filled. This created a quick and large feedback loop of trapped buyers and sellers chasing as a new LOD was made 14 minutes later. At that point, the immediate target of 1985 was very likely to be fulfilled since it was just 6 points away. We knew that the hourly extreme oversold signal would try to confirm itself again as explained in the weekend update. Remember, if the initial signal got invalidated below 1995, then it would try to confirm itself again at the immediate targets of 1985 and 1970.

The hourly extreme oversold signal was once again confirmed at 12PM and the hourly candle closed as a bottom wick hammer. This provided the market with the possibility of a two legged bounce to a minimum target of 2033. Near the end of the day, our intraday target of 2015 was fulfilled at the close and the overnight/tomorrow morning is setting up for the Leg 2 up to 2033. Bulls really need to keep holding the 1HR 20EMA support to trend up.

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Admittedly, that 1 minute 15point candle earlier in the day really messed with our mentality as we got bull trapped real hard and that made us go on tilt. Didn’t trade much for the rest of the day and hesitated on the 1986 and 1990 long entries provided by our short term charts and signals.

What’s next?

Daily closed at 2011.5, the deadcat bounce has started its course as expected if the supports held from the weekend report.

The immediate target for the deadcat bounce is back to 2030-2035 resistance as long as the 1HR 20EMA support is being sticksaved and bears do not manage a hard rejection overnight/tomorrow morning. If a hard rejection happens, then the immediate bear targets of 1985 and 1970 become valid again.

Just to clarify, we are treating any bounce that remains below 2054 as a deadcat bounce and the intermediate roadmap is still looking for the double top confirmation of daily candle closing below 1998.50. Above 2054 then we would probably be in the camp for the Santa Claus Rally as it becomes high probability.

Today’s low was 1983.25 which was the monthly 20EMA support area as noted in the previous report and the 1985 immediate target. This just shows that the market is acting very typical in terms of price action and has no crash setups like August 2015. Remember, August 2015 had a very different context as we warned about the 100 point rangebound market of 6-8months at the end of July before we went on vacation. If the market were to break above 2134 or below 2034 then it would provide a fast and furious setup to the winner of the breakout. The current setup only has a double top potential that needs confirmation with a daily close below 1998.50 that could target the 100% measure move at 1892 and 61.8% fib at 1932.68. As you can see, the context is very different and the probability of success is currently much lower as well.

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

Bear Train vs. Deadcat Bounce

Friday’s session was one of the easiest sessions to trade within the past 3 weeks because the market actually had followed through with the entire week’s bearish consecutive lower highs setup. As noted in Thursday’s report, as long as bears stay below 2060 and break the 2034.25 support then the bear train would open up the immediate targets of 2025 and the possibility of retesting the 1993-2000 support on weekly chart.

During the overnight session, the 3AM hourly candle had a rejection at the standard 1HR 20EMA resistance that accelerated into a 1HR 8EMA bear train by 5AM then subsequently broke under 2034.25 and the flood began. This created a feedback loop of buyers having to be stopped out as that was the week’s low and sellers chasing for the 2025 immediate target. As soon as price hit our immediate target of 2025 we had our next intraday targets set to 2015 and 2000. Overall, it was just a textbook bear train day where all 15m 20EMA were short re-entries for beginners to hop on the train and enjoy the ride. Generally, a train day needs to hits all 3 of the tier targets to be considered impressive. In this case 2025, 2015 and 2000 were all fulfilled by the close and this shows commitment from bears. However, the dilemma is that hourly extreme “A+ Tier” signal confirmed itself in the afternoon so a 40-50 point deadcat bounce may be in the works on Sunday-Monday if certain conditions are met*

What’s next?

Daily closed at 1998.75, it is now below all moving averages. For the intermediate roadmap, there’s a large double top setup waiting to be confirmed by a daily close below 1998.50 that has a 100% measure move to 1892. (61.8% fib is at 1932.68).

The current daily trend is a confirmed bear since price is below all moving averages and there’s no major support until 1970 on the daily chart. (weekly and monthly differs)

Weekly perspective: the market is hovering at the weekly 100SMA support of 1992~. The next minor support resides at 1985 and major support at 1970 then 1932.

Monthly perspective: Attempting to break below the November low 1998.5 with 20EMA at 1980 then no major support until 1905.

The immediate targets are 1985 and 1970. However, the market is facing a very complicated situation with the hourly extreme oversold signal vs. the on trend bear targets. Currently, our bias is the white line projection in the hourly chart which has a 40-50 point deadcat bounce in the works. We will adjust accordingly in real-time if price proves otherwise. Remember, price is king and the signals are just setup potentials that provide great risk vs. reward trades. If price invalidates the setup then that’s how we will accordingly.

Knowing and understanding the timeframes is extremely important as we head into next week. Hourly chart looking for a bounce then retest support and breakdown. Daily/weekly are looking to confirm the double top setup and march towards 61.8% fib 1932 and 100% measure move 1892 targets.

*The Hourly Extreme Oversold Signal “A+ Tier” setup

The signal was confirmed around 2PM on Friday and the same conditions remain.

It invalidates under 1995 and targets 2054. Risk 14 for 45 if enter at 2009. Risk 5 for 54 if enter at 2000.

Let us elaborate a little more, an hourly close below 1995 would invalidate this setup and the next supports are at 1985 then 1970. This means that the signal will try to confirm itself again at 1985 and 1970.

Example: A possible scenario is a Sunday gap down/price spike down to 1985~ and quickly reverses back above 2000 which could confirm the signal again even thought the initial signal got invalidated.

Our executed win rate for the overall hourly extreme oversold/overbought signals remains at 80%~ with over 200 trades across multiple instruments since we started tracking it around 5 years ago.  With that said, we only have a small starter size position with long ES 2000 using a stop at 1995 and some SPY weekly calls. We may adjust the stop at Sunday open just to not get potentially shaken out of a great trade due to a spike.

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P.S, we know deadcat is actually two words, this is done on purpose from the years of muscle memory writing these types of reports.