Market Update - Jul 14th '09

What did i say yesterday ... ? One must always be careful on salient levels like this 875 area on ES. One could have thought the upward retracement would be limited to the high 880s (Fib + MM) but ES actually found enough energy to reach the 50% retracement level, and could in fact even test the PR2 level (61.2%) close to MM pivot around 906. The daily chart seems to confirm more bullish potential indeed, even though this is only part of a normal cycle.

We've been repeating over and over since the beginning of this June pivot that retracement would be limited. We now see this bounce on 875 (16% retracement + MM pivot) as the potential base mentioned in previous reports. Again reading charts on key levels is difficult, and this is only a bounce at the moment. Selling pressure is still there and options traders with call spreads above 950 are pretty safe. Going forward, we may indeed see a trading range, or more testing of the key level. Equilibrium price is probably lower, but selling pressure also tends to dissipate over time, particularly during slower summer months.

( posted 7 AM UK )