Saturday, September 13, 2008

Weekly Outlook for ER2 Sep 15th to Sep 19th

Dominant TF: Daily, then Weekly and 60mins
Swings: UP-DN-DN (from DN-DN-DN)
Market Direction(daily): long for some, flat to reenter long for most
Options (RUT): September positions will die gracefully now. For October, no change: call options are placed above 875 for 100% safety otherwise 810 is very safe. I personally think 790 is more than safe enough. Puts below 680 to me are technically safe but could cost too mush if market falls further, so should safely stay below the 625 line.

Last week post tried to show the dynamics of price jumps with possible expectations around salient resistance levels. It's like watching pole vault at the olympics. Again the 750 level proved too high, the good thing being that we realised it immediately monday morning. The mid week update was more that necessary in these times of high short term uncertainty.

EURUSD: The US$ hit our target almost spot on (we have a [1.393-1.391] target range) as mentioned in our daily market report and I also gave indication of the following bounce with a first target to above 1.404 which was then passed. We're probably now on our way to the much awaited Fib retracement (see chart). We have a target now just above Friday's highs (1.4235), or possibly a little higher (just above 1.435). The possibility of a full retracement to ~1.47 is very remote at this stage. Energy is not conducive to thinking this is more than a short term technical retracement at this stage.

60mins: congestion, hesitation
We've seen 705 acting as a strong support to the high end of that price segment around 719, but it is still difficult to say whether it is ready to jump to the higher segment to 735, and 750 looks even more remote. We are therefore more likely to see a congestion period with prices possibly drifting again. Shall we see ER test the pivot level to go higher or go lower, test it as as resistance to then reach lows again...? That's what a pivot level is all about so we'll eventually follow a lower time frame for that purpose.

Daily: much ado about not much
Last week's post expressed how unconvincingly ER was approaching 750, so the rest of the week was almost no surprise. Now despite seeing good looking bounces on 705, it seems drifting could continue, at least to 705 again (also a Fib level) or even around 690 (MM+Fib). Obviously we'll watch the 60mins chart first in case we stay above the 719 line, to me unlikely to hold.

Weekly: very weak upper bias so still same trading range for now...
Again, one could almost just paste last week's post. 750 proved too strong and sellers are now trying to push the market into another cycle it seems. Yet, one should not fall into bearish thinking too quickly. There is a high volatility at the moment, but it is a matter of a little patience until we see energy aligning itself i.e. chaos settling a bit. Again we'll watch lower time frames carefully to determine market direction maybe next week or the week after.
We could indeed still see ER testing range boundary to that difficult breakout to the 780s... or of course, buyers giving up until we hit this year's lows again. Fortunately that scenario still looks less likely to happen.