The New Year
The last two trading weeks of 2015 were fairly simple in
terms of risk vs. reward roadmap targets based on our hourly extreme
overbought/oversold signals. The December 21st week started off with
an hourly extreme oversold signal “A+ Tier” setup confirming at around 12PM
lunch time with ES trading at the 2000~ level. This provided us with a fantastic
risk of 10 for 35-50 initial point targets of 2035.75 and 2045.75 that were
soon fulfilled within 48 hours. (Remember, it usually takes an average of 24
hours and a maximum of 48 hours from the confirmation to at least the first
target fulfilling).
The bounce extended a little bit as it was riding an accelerated
1HR 8EMA train to 2057. Then, it had a shallow pullback during December 23rd with
the first hourly extreme overbought signal that held the 20EMA support that
tested the 2057 highs again shortly after. Eventually, the hourly double top pullback
formation from Dec 24th to 28th was sticksaved at major
support 2035~ and the bulls managed to extend a Leg 2 rally into the 2070-2075
major resistance/ daily double top zone. This then gave the short term bears
another hourly extreme overbought signal confirmation that paved the way to a
quick 30-40 points flood scenario. When all is said and done, the market closed
1% red for the year.
What’s next?
Daily closed at 2035.75 and it is back below the 8EMA and
20EMA. The daily and weekly charts still show a large bull flag possibility
while this rangebound market shakes traders around.
There are no immediate targets at this current time as we do
not see any confirmed high probability roadmap. However, there is an hourly extreme oversold signal in the works that’s waiting
to be confirmed tomorrow/overnight which should provide a quick 15-30 points
bounce if so. The 2016-2020 support area must hold for this scenario to
occur as the market is currently below daily 8EMA and 20EMA - showcasing
short-term bearish aggression. The last chart attached shows our primary bias
with the white projection line for the next couple days.
Remembering and
understanding the different timeframes
Daily chart currently shows a bull flag rangebound market
and the countertrend has consecutive lower highs/micro double top possibility.
Weekly chart still has a bullish ‘hold half and go’ within
the large bull flag formation.
Monthly chart has been a 300~ points range bound market
between 1800 and 2134 since April 2014. Remember, it was an accelerated monthly
8EMA bull train before that time period; it has now turned into a sideways
20EMA bull train within the multiyear bull market context.
Overall, it’s imperative to understand that we’re merely
trading inside a daily rangebound market within a 300pt larger monthly range
while inside a multiyear bull market. It is definitely large enough to make
money trading it and traders should not be frustrated. As we saw a smaller range of 100 points for 6 months
earlier this year from March to late
August before the ‘easy money’ fast and furious breakdown.
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The more things change,
the more they stay the same. We think this perfectly sums up 2015 in a nutshell
which setups 2016 for another exciting and prosperous year as we help navigate
these waters around the sharks. After all, it’s very rare to have two flat
years in a row for the SPX/ES index.
