Weeky Outlook on ES 1st to 5th Sep '08

Dominant TF: 60mins, weekly
Swings: DN-UP-DN (from UP-UP-DN)
Market Direction(daily): long, with tighter stops

Please also read ER2 post below for guidance.

Another roller-coaster week, down and then up again, with only some weakness ahead of the weekend. A good week to trade shorter time frames, or to wait quietly that uncertainty finally settles to open way to the anticipated yet difficult recovery. We'll see below that 1281 is key to the continuation of this ES recovery.
As usual, we'll follow the general macro-economic context.

60mins: looking for support
ES will be looking at testing the 1281 level for support. The [1250-1313] range is split into 4 equal segments, and prices may remain in current [1281-1297] segment or fall into the next one below. While it should hold, we'll have to wait a few bars for confirmation, and eventually update our game plan.

Daily: same weaker trend - 1281 level is crucial to this recovery
Despite 2 blue bars, ES is still relatively congested overall. A slow difficult rise is probably emerging, but we'll remain very cautious here. As for the 60mins chart, we have to wait for prices to move to an upper segment, and breaking the 1281 level would definitely indicate continuation of this congestion period... to a possible new test of the 1250 level!

Weekly: Again, worst is over but...
Virtually no change from last week.
Now that we've seen support holding, we have been looking for a recovery potential, but it appears it will start on a slow note.
Compared to last week, only the MTFS crossover looks a bit more positive. This does not change our outlook in the least as such crossovers generally provide little recovery potential. A congestion or limited upper bias remains our favourite scenario for the time being even if Entropy is weakening too fast for our liking.

Weeky Outlook on ER2 1st to 5th Sep '08

Dominant TF: Daily, with 60mins and Weekly close behind
Swings: DN-UP-DN (from UP-DN-DN) Weekly direction is hesitant still
Market Direction(daily): long
Options (RUT): September/October call options are placed above 875 for 100% safety otherwise 810 is very safe. I personally think 790 is more than safe enough (strong res at 782) for Sep expiry (3weeks). No change on puts: placing them below 625 is also very very safe.

Last week post clearly indicated the retracement to 720s levels would open the way to a test of recent highs again. ER2 didn't quite reach the MM level at 750 but passed 746 (61.8% Fib retracement level), this is not an exact science, but we weren't too far off, were we?

EURUSD: no retracement last week, but we go with the flow and were not expecting it anymore anyway. Now the main support level is tested again in line with our previous post. The outlook remains the same with some unlikely bounce on the 1.46484 support level and probably some congestion and further tests until it breaks out. Our 1st target then will be 1.435. We'll obviously check Fib/MM level carefully when such acceleration occurs.

60mins: some weakening
Profit taking near the strong resistance level is nothing surprising. Indicators now show some weakening so we are likely to remain in the same price area. No significant retracement in sight (Check Fib levels). We do notice swings are clear, and bar colours fairly "solid" (blue, sometimes yellow on a UP swing, red and yellow on a DN swing).
As a reminder, going short on a red bar with a Swing remaining UP is a contrarian trade often requiring assistance from a shorter time frame and with target and stop closely monitored. Most in-trend traders will be long or will re-enter on a forthcoming blue bar.
Obviously, we'll also have to keep EURUSD in check (see above)

Daily: pause on major resistance level is no surprise.
No real change from last week actually...
Indicators have shown some anticipated weakness near the major resistance level, and ER2 is now ready to test it again as announced last week. I therefore repeat the same possible caveat: "Obviously this can turn into a Head&Shoulder or a more positive and decisive breakout. Impossible to say right now and other time frames do not help either, hence hesitation near resistance level remains a very possible scenario for the next few days."
Most would still be long from an earlier entry picked up on the 60mins chart. Others may want to play behaviour near test level.

Weekly: upper bias yet still same trading range
No change (simple copy&paste) from last week.
We're now again testing range boundary to a possible yet difficult breakout to the 780s. Again, we've no or little support from Entropy or MTFS to suggest more than a summer recovery with no underlying strength to take prices higher for now. There's even some 'frustration' not to have seen a clear MTFS pattern completion, but the adaptive indicator may still evolve later on. We therefore have to wait a bit still for a clearer scenario for 4th quarter.
Note: we do have a MTFS crossover to monitor, even if not in ideal situation.

Weeky Outlook on ES 25th to 29th Aug '08

Dominant TF: 60mins, weekly
Swings: UP-UP-DN (from UP-UP-UP) Weekly swing may be a little hesitant
Market Direction(daily): long, with tighter stops

Please also read ER2 post below for guidance.

To be honest, we saw ES weakening around 1300 but wasn't showing signs of retracing 35 points by mid-week. The overall picture is nonetheless the same with a volatile upper trend, partly explained by Aug derivatives expiry. The end of the week took ES about where it started and is now in better shape. We'll obviously follow EURUSD and oil prices as proxies for the general economic context, even if correlation has decreased lately.

60mins: recovery to latest highs.
MTFS is indeed clearly indicating a willingness to test recent highs again. Entropy however seems to indicate a forthcoming peak hence some difficulty to take ES higher in the short term. We'll have to wait a little to see the situation develop.

Daily: same weaker trend
Last week, i indicated that a retracement was possible without any significant change in our outlook. Entropy is now even weaker so ES may here again have trouble passing last highs and could therefore enter a congestion period. One should however hang on with out tighter stops and just wait even if this doesn't look like a quick money-making position. Obviously this is not the dominant time frame so some may also want to take profits near range highs and wait for a better looking pattern.

Weekly: Again, worst is over but...
Virtually no change from last week.
Now that we've seen support holding, we have been looking for a recovery potential, but it appears it will start on a slow note.
Compared to last week, only the MTFS crossover looks a bit more positive. This does not change our outlook in the least as such crossovers generally provide little recovery potential. A congestion or limited upper bias remains our favourite scenario. The good thing is that recent lows may prove to be a definite support level, allowing a recovery later on, no matter how slow...

Weeky Outlook on ER2 25th to 29th Aug '08

Dominant TF: 60mins, Daily, with Weekly lagging a bit.
Swings: UP-DN-DN (from UP-UP-UP) Weekly direction is hesitant still
Market Direction(daily): long
Options (RUT): August options expired gracefully below 750. Outlook for september is about the same range, with calls maybe above 780 for safety (absolute safety is above 875). Puts are unchanged although one can also spice the position up around 660.

Last week i warned about locking in profits with tighter stops as entropy was weakening fast. To be honest we could not anticipate the extent of the retracement nor can we be nonetheless surprised of volatility near expiration day. The situation is however not 100% clear looking ahead into the next few days, but this should have no consequence on our overall outlook.

EURUSD: the US$ has been more resilient than anticipated withbars staying solid red until pivot level at 1.4648 to then modestly retrace to 1.49. It would however make sense to see a retracement to nearly 1.52, but this is not visible in the charts yet, and may actually never happen... A period of quite mild retracement and congestion is possible later on. All we know is that the dominant trend has definitely changed overall and that further gains are likely by the end of this year. A likely 1st target is 1.435, then 1.383. I suggested taking profits to possible re-enter short later on, or tighten stops and hang on a little.

60mins: correlation to the EURUSD
1.49 proved to be a strong resistance on EURUSD while 760 acted the same on ER2. Retracement to the 720s is over and MTFS is fairly bullish even if Entropy isn't too strong. We'll check for Fib levels for resistance. At this point in time, ER2 may crawl back to recent highs, but this looks a little unconvincing still.
No reason not to be long, but one should remain cautious at this time frame.

Daily: pause on major resistance level is no surprise.
MTFS is weakening inches away from overbought level, so is Entropy, yet it is likely that ER2 will have another go at the resistance level. Obviously this can turn into a Head&Shoulder or a more positive and decisive breakout. Impossible to say right now and other time frames do not help either, hence hesitation near resistance level remains a very possible scenario for the next few days.

Weekly: upper bias yet still same trading range
Same as last week. We're now again testing range boundary to a possible yet difficult breakout to the 780s. Again, we've no or little support from Entropy or MTFS to suggest more than a summer recovery with no underlying strength to take prices higher for now. There's even some 'frustration' not to have seen a clear MTFS pattern completion, but the adaptive indicator may still evolve later on. We therefore have to wait a bit still for a clearer scenario for 4th quarter.

Quick Update

ES: The up momentum exhausted quickly after the open. Profit taking followed, yet this is nothing more than a return in the same trading range. We'll even notice a change in levels with a stall level on 1305, and now a pivot on current support. Resistance level is now 1313. We'll keep an eye on a possible breakout situation to switch to a lower [1256-1281] segment.

ER: Pause and some profit taking on strong resistance level, but really nothing to worry about.

EURUSD: US$ is still more resilient than expected, so we'll watch this 1.4685 support level very closely. It should certainly hold technically, but summer trading is always full of surprises, so who knows if the market will not decide to settle on 1.4348 before bouncing back a little.

Nota Bene: regular posts will resume next Monday 25th.

Weeky Outlook on ES 18th to 22th Aug '08

Dominant TF: weekly
Swings: UP-UP-UP (from UP-UP-UP)
Market Direction(daily): long, but stops are now tigthened

Please also read ER2 post below for guidance.

The wavy upper bias was our favoured scenario, and it proved to be easy to follow with clear swings last week. We only expect further weakening now in the short term, but no major change over the longer term.

60mins: upper bias weakening
MTFS and Entropy have trouble showing us the way to the larget, and since this is no longer a dominant TF, we may take cues from lower intraday time frames.
We still have a target just above 1300, but ES may also congest a bit. No major retracement in sight though.

Daily: weaker trend
MTFS points higher but also seems to indicate that ES is losing steam. It should crawl higher but unconvincingly. We'll watch for Entropy indicating a possible retracement, probably needed to take ES higher later on. For the time being, the bar is still blue so we'll wait for exhaustion of current momentum to update our positive outlook. In the meantime stops are being tightened.

Weekly: Again, worst is over but...
No major change from last week.
Now that we've seen support holding, we have been looking for a recovery potential, but it appears it will start on a slow note. We may even see some congestion above 1250, as the MTFS crossover we are seeing now comes on a negative gradient of the green line indicating some remaining underlying negative momentum.

Weeky Outlook on ER2 18th to 22th Aug '08

Dominant TF: Daily, Weekly, with 60 mins lagging.
Swings: UP-UP-UP (from UP-UP-UP)
Market Direction(daily): long
Options (RUT): no change in outlook for August, i.e. condor outside the 625-750 range. Again most will have moved calls above 780 for safety. if 750 is penetrated, 760 should however be OK by expiration this week.

Last week we saw the trend weakening and even anticipated some retracement which occurred although moderately on Aug 13th to then march higher. We had that 750 MM resistance level combined with a Fib target a little higher hence some hesitation just above 750. Some more retracement is probably waiting to happen. The EURUSD is probably key to such event.

EURUSD: we are now exactly at the level expected a week ago (see EURUSD Aug 08 post on Aug 9th). Short sellers must have all had an excellent month so far, and should be looking at locking some profits soon as we are hitting a stronger support level now. Having said that, it's only a matter of catching waves as the descent is now well engaged and more profits going short are still in store.
For the time being, we'll have to gauge the strength of the coming retracement early/mid week, which we still anticipate to be mild to moderate (check 1.5345 Fib/MM levels).

60mins: upper bias quite resilient so far
While overbought, ER2 is holding well. MTFS only shows very moderate profit taking potential still hence further gains are possible (773?). We do however see some weakening in Entropy with a possible divergence. We'll therefore also remain cautious locking in profits.

Daily: good momentum should remain there
Could not have been more right last week. Now everything is still bullish so we'll check for 750 being penetrated if not even broken. We should of course see 750 tested for support as an indication then. We'll therefore look for a MM/Fib level for a target now. Our immediate target is the last high on June 6th, which turned into a sudden reversal, so here again, we'll tighten our stops not too far below 750.
Entropy and MTFS are really looking good so a reversal scenario is quite remote now.

Weekly: upper bias yet still same trading range
Almost the same as last week. We're now again testing range boundary to a possible yet difficult breakout to the 780s. Again, we've no or little support from Entropy or MTFS to suggest more than a summer recovery with no underlying strength to take prices higher for now. There's even some 'frustration' not to have seen a clear MTFS pattern completion, but the adaptive indicator may still evolve later on. We therefore have to wait a bit still for a clearer scenario for 4th quarter.

Quick Update

Quick update from absolute paradise (Nature's Valley in the Tsitsikamma primary rain forest in South Africa).

EURUSD broke some important support. We'll now watch a secondary support (see previous post) for a bounce which becomes more and more inevitable. Indices started the week pretty strong and also need to take a breather particularly ER2 on a strong resistance level. Outlook looks good, but we won't however put doomsayers to shame until September/October as we're certainly not out of the woods yet.

Next post... next Sunday... :)

Weeky Outlook on ES 11th to 15th Aug '08

Dominant TF: All three, daily lagging a bit
Swings: UP-UP-UP (from DN-UP-DN). Weekly just toggled UP.
Market Direction(daily): reentered long

Please also read ER2 post below for guidance.

Here again, those who played the bounce on 1250 last week must be smiling ear to ear (cf last post).

60mins: upper bias
MTFS is certainly overbought and ES ended the day on a yellow bar. Since Fib target was about hit, some profit taking remains possible but ES could certainly also reach higher to 1307 later on (Fib/MM targets). Continuation of a "wavy" upper trend is our favoured scenario.

Daily: possible breakout situation
MTFS is positive yet does not indicate decisive energy for a seemingly unconvicing breakout and we could anticipate a longer congestion in the same triangle. Entropy could also peak soon. This does not change our 'long' outlook overall but we know we should expect a runaway recovery and a pullback is actually quite likely at some point this coming week.

Weekly: Worst is over but...
We finally got a yellow bar and a MTFS showing first signs of completion. The green and brown lines do however still point down so congestion is likely here. The bounce we've been expecting is certainly here though so a recovery is now slowly under way, and we can (almost) safely say that the support levels we've been watching for weeks (i.e. 1230-1250) will be holding.
All in all, all 3 swings are up, and we'll check for the optimal entry using a shorter time frame, if not long already. Note: we're not out of the woods just yet, but stop level is easy to set as we are sitting on a strong 1250 support level. We'll try and cautiously move stop to ensure breakeven when possible. There is indeed no guarantee of a strong recovery in the short term.

EURUSD Aug 08

EURUSD is usually not included as a free report on this blog, yet is commented along with the Russel report. The latest market action is however quite exciting, so here is my current outlook (see screenshot above).
We'll watch for Entropy weakening and one of the three coming support levels holding to a retracement to the 1.533 level. We'll also note that the trend reversal is about to be confirmed indicating a durable change in market sentiment (over a few months horizon that is).

Weeky Outlook on ER2 11th to 15th Aug '08

Dominant TF: Daily, Weekly, with 60 mins lagging a little
Swings: UP-UP-UP (from UP-UP-UP)
Market Direction(daily): long
Options (RUT): no change in outlook for August, i.e. condor outside the 625-750 range. Some will have followed an older comment about going safer above 780. It is a personal risk preference although 750 should not be passed by expiration.

If we read last week's (daily) comment again, we can see that a retracement 'just below 700' was in the cards (Aug 4th), that the resistance level would be tested to try and go higher (730s). Obviously, only those of you who see charts in realtime or at least day by day have seen action developing according to forecast.
Same story on EURUSD where focus was given on "pivot (may) be tested again, opening the way for further gains later on". This occured early monday, to give the Euro slide a lot more energy. Breaking the 1.534 trendline (lows) only accelerated the movement.
A really easy easy week overall... :)

EURUSD: we have a strong resistance level coming now, and a retracement looks inevitable now. However, the reversal is now well engaged, and once this level just below 1.50 is broken, more gains will be in store. This will make the Chinese happy, bodes well for the US campaign, and should leave doomsayers speechless... :)


60mins: upper bias should weaken
MTFS is certainly bullish but is quite overbought also, hence profit taking may start shortly. This is also confirmed by an Entropy about to peak. Having said that, we'll wait for an white line inflexion, Entropy going darker blue and even a red paintbar to take a possible retracement trade (for the braves only).
Should the remaining momentum take ER2 higher first, our target is around 742 (stall level), on the way to 750 later on (not visible at this time frame yet).
Retracement should be limited to around 726.

Daily: could creep higher
Very little change in fact: This is again the dominant time frame and MTFS lines still point higher. The 720 Fib level broke out to provide some additional energy to reach 730. MTFS lines gradient is moderate but Entropy is coming back a bit so ER2 could try and pass current stall level to give a go at 750 later on. It may take time however, and one may even see some very moderate profit-taking first (note: bar is still blue).

Weekly: upper bias - same trading range for now
We're now aiming back at the upper range boundary, but apart from that, nothing to add to last post really. We're in a summer recovery mode but the trading range is still there and unless new energy comes on a breakout of the 750 level (750-756 area to be exact), one may just go for another round of congestion. We'll have to wait a few more weeks and more volume to get a better picture.

Weeky Outlook on ES 4th to 8th Aug '08

Dominant TF: All three
Swings: DN-UP-DN (from DN-UP-DN)
Market Direction(daily): fairly directionless, but if still long, position could be lightened. Some will be flat to reenter later.

ES entered the congestion period we anticipated last week, and could remain range bound for a while.

60mins: slowdown or soft landing on 1250 again.
MTFS indeed points for some mild erosion. The white line is about flat right on zero level and Entropy is also indicating an attempt to very slowly move upward later on.

Daily: congestion
Entropy seems to have dissipated all negative energy but is there enough to really take ES higher now? MTFS is also midly pointing up but all in all, so little energy that one could actually stay in the same congestion mode for a while.
A bounce on 1250 remains a likely scenario later on.

Weekly: Caution must be exercised.
We're definitely in presence of conflicting forces. MTFS is here also somewhat bearish with a green line still quite negative. Yet the white line tells us that the fall may be over or slowed down at least. We'll wait for the weekly bar to turn yellow, possibly this week to confirm the end of the bear mode. Until then, we have to remain cautious. Entropy has bottomed up at a low level (EntBin = -5) so a bounce is quite possible within the next few bars.
From a pure price analysis, we obviously also need our support levels [1230-1250] to hold. Shorter time frames seem reassuring in that respect.

Weeky Outlook on ER2 4th to 8th Aug '08

Dominant TF: Daily, Weekly, with 60 mins lagging
Swings: UP-UP-UP (from DN-UP-DN)
Market Direction(daily): flat, looking at going long again
Options (RUT): no change in outlook for August, i.e. condor outside the 625-750 range.

ER2 didn't pass strong resistance level and even retraced early in the week hence my previous weekly recommendation.
We are still in "holiday" mode and will be so until Aug 25th. ER2 has retraced mildly to the mid 700s is now back to resistance level ready to give a go at it again.

EURUSD: We watched the key level and we're happy to see the US$ looking a little healthier now. Obviously, it is way too early to rejoice and more bad news may be coming later on, but there is a general feeling that the worst is now over in the short to medium term that is. The debt level in the US and its dependency on China remains worrying.
US$ may try and test range lows again, but there is still no sign of a straight path there, and the key pivot may be tested again, opening the way for further gains later on.

60mins: strong resistance level here we go again
Not an easy time frame, so traders wishing to play a possible breakout are advised to move to a lower intraday time frame.
We certainly do have an upper bias, but no indication of sufficient energy to pass the 719 resistance level. Should a breakout be confirmed, we would jump to the next level in the mid 730s and eventually 750, but that goes way beyond this time frame.

Daily: trying to move upward
This is the dominant time frame and MTFS lines point higher. Line separation and a weakening entropy do not indicate a straight path to the next important levels (730s and then 750). It is difficult to predict duration of a congestion period or exact timing for a breakout, but at least no significant retracement going forward. Should buyers give up on 719 level, we shall look at the 1st Fib retracement level just below 700 for support.

Weekly: same trading range for now
Swing just oscillated again at current level. Last week has been positive and Swing can toggle up or down in this price area. We do also notice the bar has gone blue again. We however do not get much support from MTFS and Entropy, so one should not expect more than a "summer" recovery within the same [625-750] trading range.
The good news at least is that we are now leaving the stall area which could have led to a Fib expansion to 625. This Fib pattern hasn't technically failed yet, but we have so far no pivot on the daily chart which could lead us to a down Fib pattern. All in all, not quite cheerful just yet, but moderated optimism within the same trading range. This scenario will be valid until either boundary is being tested.