Sunday, August 31, 2008

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.