Over the past week, the ES has gone nowhere, closing last week at 1264 (Sept Futures) and closing this week at 1266. We've had 2 rally attempts and they both failed.
The market has a habit of following a certain pattern for a long time and then changing the pattern once everyone gets used to it. Since March 2009 till this month, almost every dip has been a V bottom.
We would get the mini panic of capitulation, form the bottom usually within the first hour of the trading day, and head higher into the close and go up for days and days. Once we headed off to the races, underinvested longs and fearful traders had no opportunity to buy dips until we got to much higher prices.
A lot of traders are looking for a panic capitulation to mark the bottom, and then ride stocks higher into the sunset. They are looking for a V! But what's happened is that we're churning here and forming the first half of the U, but since people are so conditioned to look for the V, they are waiting for the bottom to fall out of this market to make the U turn into a V. Many are looking at 1250. Too many. If we get to 1250 and bounce hard to make a V bottom, it would fit in with a lot of trader's plans. Probably the most likely course from here is that we churn higher in fits and starts to 1300, form a higher trading range between 1275 and 1300, before we make a sharper move higher to 1340.
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3 comments:
Sounds good to me!
a move down to 1238 scares 99% of V bottom hopers
Makes alot of sense. Lot of undervested scared funds and investors out there. If we print 1300 this or next week, legions of chasers rise from the dead especially with a positive July payroll reading.
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