Thursday, January 08, 2009

Market update - Jan 8th '09

Previous reports anticipate a possible peak as we noticed how fragile the recovery had been last week. Again we have however been a little surprised by the amplitude of the move but it seems that ES losing over 30 points in a single day is almost something normal these days. For instance, let's rank all log returns for ES since beginning of 2004 on an Excel spreadsheet. Then , let's have a look at extreme moves in the top and bottom 3% (out of 1266 prices), we can see that from Sep 1st last year, we've had 90 prices (about 3 months), of which 50 fall in those extreme top/bottom 3% !!! Only 40 don't. To put this into perspective, this represents daily moves over 2%. Now we better visualize what volatility is all about...

Now back to our charts:

I commented EURUSD around noon yesterday and we got our short term move to target since. We do have conflicting patterns on the daily and weekly charts so we put things in context with the current strengthening of the US$ being counter-trend (ECB rate cut expectations). Our 60mins chart shows some erosion on target with a pattern forming on pivot level now turned to strong resistance. US$ should therefore fall further to just below 1.35 . But to stay on the safe side, we'll only confirm this scenario on resistance (~1.367). The daily chart shows a possible target below 1.32 (still counter-trend from weekly pattern).
Anyway, to make it short: check behaviour on MM level (1.367) for reversal to below 1.35.

ER: We anticipated that kind of airhole on the 500 area. It is likely to be tested again for resistance to send prices a little lower. ER could shed more points to settle on a Fib level (60mins chart). Like for €/$, we'll wait for a confirmation by checking ER's behaviour on 500 first, in which case, we would have a 481 target.

ES: Same correlated patterns with prices settling lower either just below 900 i.e. around the corner, or more likely in the 887 area.

Good trading to all,

( posted 6:50 AM UK - screenshots available on request )