Quiet Day

Wednesday’s sessions was pretty quiet and I received reports of purported distribution in the form of large sell orders as we are approaching the final inflection point of ES 2730. The journey higher from the lows at ES 2340.5 has been fairly uneventful thus far and since markets rarely continue to move in a straight line for long a revisit of either ES 2700 or ES 2745 is in the cards.

I’m actually writing this post on Wednesday evening near the closing bell as I have scheduled an appointment with my sadistic Spanish dentista for tomorrow morning. Chances are that I won’t be able to form cohesive thoughts (or chew solid food) for a while after the procedure so here are a few pointers ahead of time:

The Zero indicator shows us only minimal participation all through Wednesday which was marked by wild spasmodic swings. However the entire session was limited to merely 10 handles, so it probably felt/looked worse than it truly was.

The green boxes mark consecutive failures by the bears to exploit several textbook bear setups. It’s starting to get expensive for them and if the current one is added to this list then there won’t be enough butter in hell to soothe the hellfire that is in store for them.

The long term chart could frankly not be any clearer right now. The S&P has mirrored its preceding decline, reversing half of its prior losses, whilst posting the best January in 30 years. The bears are in shambles at this point, having shorted this rally all the way up.

The final inflection point lies directly ahead of us and is marked via the 25-week SMA which is is in earshot of two nearly overlapping monthly Net-Line Buy Lines at 2702.5 and 2709.5. The former was successfully conquered by the January candle, which officially puts a monthly buy signal on our books.

That said, the odds of immediate continuation here are iffy IMNSHO and it’s more likely that we are going to end up with a massive inverted H&S pattern, which historically has a success rate of over 71%. So if we see a reversal here then I would see it as a prime accumulation opportunity. Assuming of course a convincing spike low near medium term support has been established.

How About Them Bears?

The bear is wounded but not out just yet. A drop through ES 2600 would be needed to put the bearish scenario back on the table and a failed retest to make it the most plausible. It is possible of course, and admittedly it would screw the majority of market participants. But is it likely?