Market Outlook ER2 (RUT) for May 22nd '08

Dominant TF: Daily, Weekly, 60mins dropping fast
Swings: DN-UP-UP
Cycles: unreliable
Market Direction: congestion to very minor upper bias.
Position (60mins): flat to short
Options (RUT):
Short Jun790 Calls, Long Jun800 Calls, Long Jun610 Puts, Short Jun620 Puts.

On last ER2 post, i warned of the 60mins Swing being unstable and it indeed turned negative again. Yesterday, I also anticipated a lower support on NDX... but admittedly did not see such a down draft coming. The sudden bout of attack on the US$ and the seemingly unstoppable run on oil explains it all. Not sure when all this will end up...

60mins: looking for support
ER2 may have found support on or close to yesterday's lows (Fib target and MM stall level). MTFS points lower and Entropy is relatively strong so a lower bias is still valid so yesterday's lows to low 720s could be tested again.

Daily: congestion to minor lower bias, up trend still valid.
On last post, I said: "750 looks so close yet also looks so predictable that there could be significant program selling on or close to that level". It couldn't be more true. At this level however, we see nothing more than a congestion to a minor retracement for now. We will check channel lows for possible support.

Weekly: congestion, possible retracement
No change from last post:
While the upper bias is now obivous, the market is looking at pausing soon not only to better complete the MTFS pattern but to consolidate to eventually go higher later on. We will therefore keep a close eye on MM/Fib levels particularly the combination of the two in the lower 750s. Like in lower time frames, the MTFS pattern and the Entropy do not point for a return to the bullish trend yet, so again, it is likely that a retracement or consolidation will be necessary.
We'll keep into consideration that this is a crucial phase as the pattern can reverse and on the contrary turn back to bearishness, test of last lows etc. We'll obviously have to first wait for the next pivot point and then the subsequent support level, and this can take up to a couple of months. We'll have plenty of time to come back to this in future posts.