Sunday, July 20, 2008

Weeky Outlook on ER2 21st to 25th July '08

Dominant TF: All three, shorter time frames leading
Swings: DN-UP-DN (from DN-DN-DN)
Market Direction(daily): flat to long
Options (RUT): no change in outlook for August, i.e. condor outside the 625-750 range.

On ER2, last weekly post indicated exiting shorts but not going long just yet (following our time frames and market outlook). We indeed saw a bottom being confirmed and even some attempt to go higher. Looking at intraday time frames, some would understandably have gone long last week.
All in all, last post again didn't do too badly. What next now?

EURUSD: There will only be a chance of significant recovery if the US$ passes 1.5625, so fairly weak and directionless still. We'll obviously also keep an eye on oil prices and further consequences of the subprimes blunder.

60mins: no upward momentum but...
We indeed saw ER2 passing the MM pivot level briefly to hit a Fib target but there was not energy to carry prices much higher. Hitting 700 was even a bit of a stretch.
MTFS is pointing for a mild erosion and MM level turned to Strong Resistance.
There is still a vague chance that SR holds as support but this is unlikely. One would rather anticipate ER2 to find some support on a lower Fib retracement level. There is however no indication of a reversal (we don't even have a single red bar) so prices shall not reach recent lows again.

Daily: trying to move upward
Despite the early MTFS line crossover, we now have a positive outlook on ER2 with lines pointing upward. Entropy is also looking healthier now. One might have entered long last week from lower time frames (i however purposely only give a market outlook and no trading signals per se). Stops would be tightened now.

Weekly: congestion to a little bearish
For the 2rd time now, MM stall level seems to have broken the fall, and one might think that a reversal is in the cards. Yet, MTFS and Entropy look if not bearish at least congestive so one should certainly not expect a strong rebound before the negative pressure is dissipated. Furthermore, as all 3 time frames weigh equally now, the latest bounce may only be a reprieve and the Fib target around 625 can still be hit within a few weeks and without any significant exogenous shock to the market. One shall therefore remain fairly cautious as one should always be when Swings are in a DN-UP-DN configuration.