S&P 500 is Grinding Higher

In addition, as you may be aware by now, the average range per day has been narrowing for the past few weeks due to this methodical grind up and slower momentum when compared to Feb-April 2020. As previously discussed, the recent action is very similar to year 2019 as we’re seeing flashbacks from all the market tendencies of the easier overnight grind up and then chop around during RTH. (Nowadays, most gains have been made during Globex vs RTH, hence easier setups during the overnight.)

The main takeaway remains the same from the end of May given that the bulls accomplished their key goal by ending the May monthly closing print at the dead highs in order to enhance the odds for upside momentum. The bulls did what they had set out to do since April because it’s been an on-trend upside breakout back to the 61.8-78.6% fib retracement of the entire drop (3397.5-2174 range).

As discussed, the bears ran out of time as they failed to capitalize on all breakdown setups and the bull train has been on an accelerated phase riding the daily 8EMA upside alongside with price action hovering above the 200 day moving average. All this is buying time for things to catch up and elevate even more by resetting price action, internals and momentum.

What’s next?

Monday closed at 3053.3 on the ES as an inside day around the range high area of the past few days. The overnight produced a decent long setup in the 3035-3040 region for the higher-lows and higher-highs play as the overnight bulls hit a high of 3075.5, which is just under our key level 3078.  So it means that price action has been acting very methodical lately during the globex sessions.

Key points in our game plan:

  • For now, the 4-hour white line projection from last week remains king given the high-level consolidation/grind up towards 3135 target.
  • Our intermediate target is now confirmed at 3135 when price action remains above 2947.5 and specifically when above 2990s due to immediate momentum.
  • Friendly reminder: the past ~18 sessions, the overnight globex session has showcased better/easier setups than the RTH duration so traders must be aware of the current environment when trading.
  • Zooming in, treat 3000-3050s or 3000-3060s as a high-level consolidation/bull flag structure. Buy near support and don’t get caught in the middle because the edge becomes low. Wait for the eventual upside breakout towards 3135 if price action continues to remain strong.
  • When above 2992/3000, the bull train is in an acceleration phase on the daily trend chart.
  • Conversely, a massive breakout failure/trap would be considered if price action falls below 2992 and then close below 2947.50 on a daily closing basis.

For a look at all of today’s economic events, check out our economic calendar.

By Ricky Wen, ElliottWaveTrader.net 
Ricky Wen is an analyst at ElliottWaveTrader.net, where he hosts the ES Trade Alerts premium subscription service.

Potential Trend Change in Market

As of the regular trading hours open, the S&P was around the same spot as yesterday’s closing price area of 2850, which coincides with our key 2850 level discussed below.

What is the bias/gameplan going into today?

For intraday purposes, we’re going into today as neutral-biased given the overnight reaction relative to our key levels, as the ongoing ferocious battle is still a potential trend change on the daily chart.

If we zoom out, we remain bear-biased going towards around 2650 per our 4-hour white/red line projections from earlier this week, but we are still waiting for more clues/confirmations. Bears need some sort of a day 2 setup to the downside eliminating the daily 20EMA trending support in a decisive manner in order to prove that the big, bad, real bears rotate back in town instead of gummy bears.

Fun fact, the bull train has bottomed out relative to the daily 20EMA trending support area every single time since the April 6, 2020 breakout, allowing us to catch and milk ES points and profits in textbook fashion. Will this time be different? We don’t know, but we are definitely prepared if and when the sh*t hits the fan. Otherwise, we BTFD at support again and keep milking this bull train.

For the next few sessions, the only thing that truly matters is whether price action maintains above 2850 or not on a daily closing basis. A breakdown below 2850 would be the first indication that big, bad, real bears rotate back in town, so we must stay vigilant.

For what it’s worth, there are lots of market participants that are getting complacent as the market has been nearing the ES 3000 psychology number by grinding up since the March 23 lows, and now everybody and their mother has been accustomed back to BTFD and getting PTSD from shorting.

This is why I suggested last Friday that doing homework over the weekend was imperative as you have pre-determined levels drawn up so that you could react quickly, if need be, in the first few sessions/weeks/whatever. You are prepared no matter what.

What should be your next step?

What’s your sh*t hits the fan level? What’s your first clue? What are your major resistances? For reference, the past 2 week’s high = 2965, 2 week’s low = 2771. The decent range for now.

See chart reviews and projections on the Emini S&P 500.

By Ricky Wen, an analyst at ElliottWaveTrader.net, where he hosts the ES Trade Alerts premium subscription service.