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.
