Sunday, May 03, 2009

Weekly Report on ES & TF - May 4th to 8th '09

We've had a shorter week last week even though trading volume was sustained on Friday, and as we anticipated, we have a bit of indecision and synchronization going on with indices now sort of realigning on their respective resistance levels.

The top question today is "Shall we now see those key levels being broken or not ?" ES is still quite bullish and the slower MTFS green line is now slowly joining the party. The chances of trend reversal are now quite reduced and a breakout is even possible. Again one should always go with the flow even if we an action plan in mind. Therefore, we have to assume that a breakout is possible opening the way to the 1000 level. We do need at least a red bar on the daily chart to bring up the retracement scenario that has been discussed for a week at least.

On the 60 mins chart, we do notice a trendline linkng channel lows hence some selling could start if ES breaks 865. Buying pressure however still looks like a dominant force.

On the daily chart, retracement levels once confirmed will be 800, 775, then 750. Nice round numbers, but nothing more than potential targets until a retracement starts showing.

ER has now caught up wiyh ES and hit 500. This level looks a lot stronger than the equivalent 875 on ES, so will this trigger the expected sell-off ? Difficult to say now but we should have an answer by mid week. In case of profit taking, a target around 440 to 445 is likely, but nothing more as MTFS is now relatively bullish.

I'm afraid i haven't here given a clear answer to the "top question" above, but my reading of the market is to prepare for both a likely retracement and a less likely breakout, even if the breakout would be a normal continuation of the current market configuration.

( posted Sunday Morning UK )

PS: Commented chart available here