Market Update -> Market bottom now?
Sunday night, we make a statement below on the US Stock market:
“In conclusion, both the $VIX the $ES are indicating that the market can go lower this week with Monday being a very critical trading day. Friday’s push upwards was a fluke right now because the push was not enough to weaken the bearish trend.
If Monday close higher then maybe, some type of weakness could be seen but until Monday trading day ends, we will not know.”
Monday was President’s day and the US stock market was closed but the futures market was open. The $ES moved higher so the probabilities changed and the market now can go higher.
Let’s revisit the charts and see where we stand now mid-week. See if the markets move upward is enough to force a bullish pull back on the higher time frames.
The daily time frame for the $VIX was controlling the probabilities on Monday. Price was at a major support. If that support held, the $VIX would go higher and the stock market would go down. If it didn’t hold, the $VIX would go down to the next major support and the $ES would go up.
Below is the daily chart of the $VIX. The sentiment is bullish but we are in a consolidation pattern now around the cloud. Since the consolidation pattern is around the cloud, the sentiment can easily change with a drastic move in the stock market. Two supports are shown in the chart. The 20.61 is the weekly time frame support and the 19.75 is the support based on daily. Price has a high probability of reaching the support at 20.61 but it may not due to the fact the bottom of the cloud is not flat. This indicates there are a lot of minor supports to get to the major support.
Let’s look at the 4h to see if we can get a clearer picture since the daily support is moving. Below is the 4h time frame. The 4h doesn’t match the D/W time frame support at all. This indicates there is NO multiple time frame support. Any time frame support can win the “battle of supports”.
Let’s look at the $ES and see what is going on. Below the daily chart. It shows the next support/resistances. With the upward in the last 2 days, the chart is indicating it is going through a pull back. Right now, we CAN NOT determine if this is a major pull back or not. The only thing we know is that there is a high probability of reaching the resistance at 1939.82 as long as the support at 1874.02 holds.
The daily time frame is a very ugly chart pattern so let’s look at the weekly time frame to get a clear picture.
Below is the weekly time frame. It shows a consolidation pattern that is slowly going down.
In conclusion, we have a short bullish movement to the $VIX support and $ES resistance. Once we get to these levels, we can forecast from that point on.
Remember, we put out a 2016 forecast in October 2015. We stated that 2016 is going to be a trader’s year with a lot of volatility. The markets were going to go down at the beginning of the year. A temporary bottom would be reached in Feb when the low was retested. After that, price would go up until April. After April, price will start to move to retest the low’s of year and break it to start a bearish trend. This is a forecast that change. As a result, it has to be backed up by actions from the charts on a daily/weekly/monthly time frame. So far, the actions are following the forecast. This forecast was created by examining the weekly/monthly/quarterly timeframes.
For trader’s that can’t see the quarterly chart. Here it is below:
Notice, long term, we were consolidating between 783 and 1567 during the Internet “Boom” and “Bust” and also the Financial “Boom” and “Bust”. In April 2013, we broke this consolidation pattern and started a long term bullish trend. The trend was so strong that the red short term support has been holding price upwards. However, price is “filtering around” this red short term support. If we close below it, there is high probability of going back to 1567.43 which will a major bearish trend on all time frame except monthly and quarterly. On the monthly, it would be a major pull back to the cloud and the quarterly will a medium pull back.
People ask me IF the markets crashed, how far can they go? Well, here is your answer! It is not a guess, it is quantified. We trade with probabilities and no emotions! This is the only way to be a successful CONSISTENT trader. Notice, I use the word’s CONSISTENT.
We have traded through 2 major long term down turns. On the first one, I lost! Greed, impatience, analysis paralysis, not humble, etc are the “words” that caused it. We learned from our mistakes and it guided us through the second major long term down in 2007/2008. Now, we are humble and will take what the market gives us in ANY direction.
We have been blogging since 2007 and this is our accountability to me and to the trading world.
EDUCATIONAL USE: Commodity Futures Trading Commission, Forex, Futures, Equity and Options Trading has large potential rewards, but also has large potential risk and may not be suitable for everyone. You must be aware of the risks and be willing to accept them in order to invest in these markets. Do not trade with money you you cannot afford to lose. This is neither a solicitation nor an offer to Buy/Sell. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on this document. The past performance of any Trading System or methodology is not necessarily indicative of future results. All information provided on the Blog is for educational purpose.