Going with the flow...

What did I say yesterday in conclusion of the daily report? Yes, i used the word "purge" on purpose, and there was indeed an easy lucrative short. It may be painful for some but we need to go through it to rebound. Most institutionals have given up on 2008 and are preparing for a better looking 2009 but at the same time, we may have a patch of blue sky before 2008 comes to a close.

EURUSD: A very modest bounce is possible today but the overall trend remains down to a ~1.245 pivot level. Mid term, we however have to notice a likely bottom somewhere between stall level (~1.22) and ~1.245. This is no excuse to go long, but only to take shorts a little more cautiously.

ER: Markets are somewhat correlated and even a bounce on EURUSD may have an impact on ER. However the the trend here remains down until a new support is found. Such support could be near current lows, but is more probably around 390. What's another 20 point drop these days anyway...

ES: yesterday's fall stopped on a strong short term support around 812, but the downward pressure is still strong so we could be heading towards 750.


The purge is not over, yet it does not mean markets will lose 4 or 5% every day until we eventually hit the final bottom (I mentioned a possible ~710 target for ES in previous reports). Again, we'll remain cautiously bearish again today, and as usual, go with the flow...

(posted 11.30 PM Eastern)