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On the weekly chart almost everything points to the start of a downtrend that could last 7 weeks. Targets based on previous support levels are 875, 820, and 807 based on previous support levels.
On the daily chart I have …
From now on I'll post them into this thread. Last week I said:
Last week's outlook was pretty accurate although I admit everything happened faster than I had thought. Normally the two days before July 4 are bullish, so that makes me even more bearish.
My indicators are bearish and are approaching oversold but are not yet very oversold. During a downtrend the oversold indicators are not timely so we should be paying attention to the overbought signals. This means the market could give a small bounce up or could continue down pushing the indicators further into oversold territory which is normal for a bear market beginning.
The next few days are key. After a big down day like Thursday we should have continued selling. If however the next day or two remain flat or advance, that means there is demand. This demand could be enough to push the market up towards 920 or it could be just enough to cause a pause in the downtrend. Any considerable move up on increased volume will likely point to a move back up to 920.
Hi Jose, I do both swing trading and day trading. I use a similar technique except for swing trading I use a lot of breadth data (put call ratio, advance / decline line, COT, etc.). For swing trading I use mainly weekly & daily charts, and sometimes a 1 or 2 hour chart to pinpoint entries. I'm looking for trades I can hold for 1 or more weeks. I'm current short ES from the June 19.
I'm currently working on backtesting some of my indicators and fine-tuning them. I want to post some in the future. All my indicators are what I call "non-standard" indicators. I don't have any MACD, moving averages, RSI or anything like that. I've written most of them myself.
So in the upcoming weeks I plan to share and show some charts. I want to trim down my charts first and see if I can prove some of the ideas. That's what I'm working on now.
For daytrading I do not scalp. I look for 5 ES trades/day around 2-6 pts profit and 4 point stop. I look at Support & resistance, volume & price to pick turning points. Same for swing trading really.
I use tradestation so the indicators I post will be for TS but they could exist for Ninjatrader or even be coded up.
Yesterday's price action wasn't that good for the bears. We ran into demand around the H&S neckline and I got bullish divergences. My guess is the buyers waited for it to penetrate the neckline to bring in shorts and get longs to cover before they stepped in to defend the neckline. Also sellers are taking a pause to allow prices to go higher so they can start the selling again.
Everything points to a bounce so today I covered my position and I'm flat. I'm going to wait for a bounce on weaker volume and hopefully bearish divergences and I'll go short again. I expect the next short to carry through the H&S neckline and down to the target. I really debated covering or just sitting it out. But too many short term bullish conditions for me to sit it out.
I don't really intend for this to be a journal, the most important thing for this thread is for people to participate. So let me know if you're long, short, or flat and why. It can be on simulator or real money whatever floats your boat. The important thing is to trade and share ideas.
2 weeks ago I gave downside targets of 875, 820, and 807. We passed the first target this week however ran into support which suggests a pause in the downtrend.
An update on the H&S pattern. The neckline can be drawn in two places, the usual is between the shoulder lows. The break of this neckline was not on high volume which is not a good sign. A pullback usually occurs after a break of the neckline which would be around 895. However 885 which is the low of the right shoulder is acting as resistance.
The second line is a horizontal line below the left shoulder at 872. Price briefly went below this line but closed above it on high volume on Wednesday. This shows there is support at this price. However the last two days were on lower volume which shows there was not a lot of follow-through of the demand.
2 weeks ago we had a bearish outlook (5 bearish and 2 bullish signals) which predicted the recent move down. This week we have 6 bullish signals and 1 neutral. This indicates a move up is very likely. The target for the move up likely to be the gap between 918-908.
However the weekly chart is still bearish so the long term trend is down and any move up will be an opportunity to establish or add to short positions.
I'm currently working on formulating my indicators (around 5 on the weekly and around 9 on the daily) into a single indicator to simplify things. It takes me a lot of time to analyze them all each week. If I put them into a single indicator then I can backtest it and see how it works and post simple charts.
Unfortunately I'm leaving for vacation this week and will be gone for 3 weeks. So it'll probably have to wait until my return. in the meantime I'll try to post weekly updates.
Here is a daily chart showing the H&S lines, the gap, and the bullish divergences. The indicators are Better Volume which color codes volume based on the range and direction, Klinger + ATR which uses volume to weight a price indicator momentum indicator. It's good for divergences. Below that are Kase KCD & PO which are price based and show momentum and therefore divergences.
Klinger + ATR is showing a bullish divergence (marked by the right arrow on the chart) and the Kase KCD is showing two bullish divergences (marked by red lines and also the two blue arrows). The Kase PO is longer term and is showing momentum has not yet penetrated to the bottom side. These all point to a pause in the downtrend at the least and a move up at the most. Combined with my other indicators I'm quite bullish for this week but not enough to go long because that would override the long term outlook from the weekly chart.
I am now flat, waiting for the pullback (possible formation of a 2nd right shoulder) to go short again. Downside targets are 820 and 807.
The previous H&S pattern has been invalidated by a Sign of Strength through the neckline. It’s possible we’re forming a 2nd right shoulder (there were 2 left shoulders) however the pattern is very asymmetrical and most would probably not consider it a H&S pattern. Whether this is a H&S or not is mostly irrelevant because the new neckline forms horizontal support just under the lows, in the range of 864-872.
Last week we have 6 bullish signals and 1 neutral which predicted the move up very nicely. The estimated target was the gap between 918-908. The market gapped up into this gap and continued upwards on decreasing volume. Gapping up through a gap is an interesting occurrence because on one hand it’s bullish but on the other the resulting gap is likely to be filled which is bearish.
All indicators on the daily chart are bearish (except the PC Ratio which is neutral), with many having turned down from oversold levels. This creates a bearish outlook for this week. The target is a fill of the gap at 903.50.
The weekly chart is just slightly bullish so the original downside targets around 800 are put on hold. The next few weeks are key.
Possibilities:
·The market continues higher, despite the oversold levels.
·This week is a small pullback due to the market being oversold, and then the market then continues higher to challenge the current top around 950 (the outlook there will depend on price action, depending on whether we have a breakout or a double top).
·The market continues heading lower forming a H&S pattern.
In my opinion the first isn’t likely. So this week’s outlook is very short-term while we wait for more clues for the longer term.
I went short this week with a partial position, this was a bit pre-mature but I'll be looking to add to my short position depending on the price action on Monday.
Last week the charts were bearishly positioned with most indicators down, however the weekly chart was “slightly bullish” which caused some confusion and resulted in a neutral outlook. I listed three possibilities and the market took the “unlikely” choice of continuing higher on increasing volume showing good strength. The fact that it was able to do this despite the bearish and oversold indicator levels was very surprising.
The question now is: Are we in the second stage of the rally or a parabolic blowout end to the bear market rally?
It’s too early to tell. Several indicators turned down and then turned back up and have the potential to make bearish divergences which will need to be confirmed by price. This week’s outlook is neutral while we wait for such signals. The market is too extended to chase it with a long, and with a bullish weekly and daily chart it’s too early for a short.
I'm still short and in hindsight I should have waited for more of a confirmation before adding to my short position. Wednesday looked to be a reversal day but the market reversed and went higher towards the close. I was too early and now I'm in an uncomfortable position of waiting for more clues while holding a losing position!
An aside:
I've been bearish on the economy and the market for a while now and this bias has affected my ability to objectively study the charts. As an example, a few weeks ago I knew the daily chart was bullish so I covered my shorts. But I didn't go long, because I "thought" the weekly chart was still bearish. Was it bearish or was it my personal bearish bias influencing me? In studying it now I think it was the latter.
Which is oddly enough why I decided to start this weekly analysis (privately, before sharing here) in the first place. It was to help me with my own trading and to force myself to form my outlook on the charts instead of my own personal beliefs and biases. Then I thought if I were taking the time to write it up, I would like to get some comments and opinions from others. I'm still hoping this will be the case and I hope others will participate, if nothing else to let me know if I should continue or not.
