NEW All-Time Highs is Expected for SP500. How To Combine Two Price Action Patterns

NEW All-Time Highs is Expected for SP500. How To Combine Two Price Action Patterns

Higher short-term lows in both Copper and SPX, led to good market movements as was suggested in the last week's post. While for Copper it is a good place to close the trade or use a trailing stop (because of the good accumulation) for the S&P500 the things are a little bit different. 

SPX analysis

As you can see from the chart, I think that there are increased chances to see the indices on new all-time highs.   

Combining Two Price Action Patterns

Before we start with today price action lesson, let's first discuss the setup we are witnessing in the 30 Year US Treasury Bonds. Here is the chart.

US T-Bonds analysis

It seems that T-Bonds are set up for a rally. There is a short-term COT pattern. Also, Commercials' net long position is at an extreme, so is the Large Specs'one.   

What is even more interesting is that the Small Speculators became net short. That is a good sentiment sign. Usually, when the small traders are net short this marks the absolute bottom in US T-Bonds. Unlike the other two groups, the signal coming from the Small Specs' position is a short-term that will develop very quickly.

If to the current bullish picture, we add an accumulation measure like the On Balance Volume, for example, will see that the price is weaker compared to its accumulation measure. Such divergences lead to a bullish movement. 

Now to the timing! 

You've probably noticed that often I am referring to a mini price action course. That is because it describes a complex price action pattern which is very powerful (check the Orange Juice from last week's post). It starts with finding the largest bar (candlestick) in a currently developing move. 

Let's do that for the US T-Bonds futures. 

Price Action Lesson

On the picture above it is highlighted in orange. That is 0T Long Body bar that happens to be the largest bar in the last decline. 

Also highlighted, this time in green, is a bar which is a mix between Long Tail and Equality (the body is the smallest part). But here not the shape of the bar is important but the fact that it is an outside bar. If you recall the price action lesson from the last blog post you'll notice that we have the same sequence setup-> range → outside bar again. 

When we combine the biggest day from the mini-course with that sequence, we see that price action is suggesting a rise in the US Bonds. For EQ bars, The Talking Chart book says that the breakout of the high (we are looking for long signals) will be followed by a move in the same direction.   

This is a very good example, showing how two very complex price action patterns can combine. And having in mind the COT setup and other tools... I don't know about you, but I'll be looking for long signals here. 

Now, let's find your missing piece!

Vassil Banov,
Founder of Piece of Trading

Trades mentioned here are either taken or will be taken by the author if the right conditions appear. They are NOT recommendations nor any of this constitute investment advice. Please read the Risk Disclaimer
Seasonal indicators courtesy of Larry Williams, Charts made with TradeStation®.

TAGS: S&P500, SPY, SPX, COT, Commitments of Traders, Copper, Cycles, Seasonality, Copper, Price Action Trading, Price Action Pattern, Lesson