Market Outlook RUT for Oct 16th '07

Dominant TF: Daily & Weekly
Swings: DN-UP-UP
Market direction: congestion, possibly mildly Up after support level is found.

60mins: Down, or a bit of roller-coaster at best.
We undoubtedly saw it coming from a distance and the situation is about the same as for SPY, except maybe that we are on stronger support or pivot levels. AdStoK and Entropy certainly point lower, so we should maybe look for a lower support level.

Daily: Congestion to down at first. Overall direction unchanged yet but new support will have to be found.
AdStoK is weaker and lines are crossing, indicating a definite slowdown. The red bar confirms also the diagnostic. We could certainly look for support between 808 (Fib) and 812 (MM) in the next few days.
The high volatility environment seems to accelerate movements in either direction, however Entropy is still fairly high so this down move should be fairly controlled. No reason just yet to believe it will go lower than those levels... unless some economic news shock the system of course.

Weekly: mildly up until...
It was clear RUT would hit 851 (highs + Fib) but what is now coming next? AdStoK and Entropy do not point lower, so one should not panic just yet. RUT is likely to hold or even possibly go higher. Strong MM resistance is still 875.

Market Outlook SPY for Oct 16th '07

Dominant TF: Daily (and 15mins)
Swings: DN-UP-UP
Market direction: Congestion. Upward bias still valid overall despite some profit taking.

60mins: Congestion to mildly down.
Our word of warning proved to be correct. As for NDX, we clearly had a classic pattern forming. Now, what's next?
The late recovery cames mostly from day traders squaring off positions on day close, but SPX should go lower. Watch 153.4 (Fib) or even 153.1 (MM) in the near term, as it is likely that AdStoK lines will now go lower to cross in oversold territory.


Daily: Profit taking, but not change in overall direction yet.
AdStoK is so overbought with a white line declining, but Entropy is still holding fairly well. This is not indicative of any strong retracement in the near term.
We however now have a red bar, so profit taking could continue at a slow pace, possibly to 150 which would be tested for support and is a Fib PR1 level.
It is certainly too early right now, but one should keep it in mind.

Weekly: mildly UP.
The Swing indicator is now more firmly up, but the key swing price level is still close at this time frame.
Entropy is also looking better and the trend should remain mildly up for the time being as AdStoK lines are close to crossing with a strong up gradient.
We can however see some divergence in AdStoK and a low significance level at this time frame, so this is only background information at the moment, and one should focus on lower time frames (15mins and daily).

Market Outlook NDX for Oct 16th '07

Dominant TF: Daily and low time frames (15mins)
Swings: DN-UP-UP
Market direction: Congestion - Up bias still valid.

60mins: 2156 is pivot level. NDX should go slightly lower.
Couldn't have been more right yesterday. We were in presence of a classic pattern, which turned into a textbook Fib expansion to 2143. As the pattern is now complete, we only have a few clues about what is coming next. A negative bias is still in the market, but energy is not high enough to carry NDX much lower right now.
Levels to watch: around 2120 (Fib at 2117 and MM at 2125). 2156 is pivot in lower time frames, so one may also see some seemingly congestion at this time frame while lower time frames test this level up or down.
The 15mins chart is the most significant right now.


Daily: Up until...
AdStoK and Entropy are now showing some early signs of weakness and significance level is still the highest of all 3 on this chart.
There is however so much accumulated energy (in Entropy) that one cannot imagine a serious retracement right now, but one could certainly have a pause with some congestion and profit taking. This high volatility environment can also obviously accelerate movements in either direction, but that would take a few days to materialize.
For the time being, i would recommend keeping an eye on the formation of a clearer pattern (H&S, DT, or breakout) in intraday time frames.


Weekly: Mildly UP until resistance is found
AdStoK lines have now crossed over so NDX may be a little ahead of itself, but significance level is so low at this time frame (divergence) that we should not jump to conclusions.
A crossover is very often a decision point, but we shall draw more information from lower time frames for now.

Market Outlook RUT for Oct 15th '07

Dominant TF: Daily & Weekly
Swings: DN-UP-UP
Market direction: congestion, possibly mildly Up

60mins: a bit of roller-coaster... or congestion with price erosion.
We here have the same indecision as for SPY, however with a lower entropy.
The 843 resistance level may prove to hard to break, which would trigger a new test of recent lows (831). One may just as well stay in a trading range [836-843].

The same caution expressed last Friday still applies going forward: One must watch the coming trading range very closely as it could form an interesting pattern (head and shoulder? double top?). Too early to say, so reading too much between the (AdStoK) lines could lead to unfounded speculation.

Daily: Congestion to mildly up.
AdStoK is very overbought and is now showing some weakness. The white line crossover will give us interesting information shortly. Entropy is lower and the dialy bar has turned yellow.
There is no reason to panic just yet, but the slowdown should soon be confirmed.
Current resistance level at 843 is fairly strong then 860 and ultimately 875.
Support: 828 (likely), then 812 (unlikely in the short term).

Weekly: mildly up until...
It was clear RUT would hit 851 (highs + Fib) but what is now coming next? AdStoK and Entropy do not point lower, so one should not panic just yet. RUT is likely to hold or even go higher. Strong MM resistance is still 875.

Market Outlook SPY for Oct 15th '07

Dominant TF: Daily
Swings: UP-UP-UP
Market direction: Congestion. Upward bias still valid.

60mins: Possible congestion with upward bias. 156.25 is a pivot level to watch in the near term.
This AdStoK pattern is not the easiest to read, as we have really no energy left right now (non existent Entropy), so it may require a bit of a 'shock' to move either way. A trading range [154.60-158-50] is likely for the time being.

Daily: mildly up.
AdStoK is so overbought with a white line declining, but Entropy is still holding quite well. This is not indicative of any strong retracement in the near term.
We could however have some increased volatility in the next few days, and a direction then emerging more clearly. Until then the upward bias is still valid.

Weekly: mildly UP.
The Swing indicator is now more firmly up, but the key swing price level is still close at this time frame.
Entropy is slowly looking better, and the trend should remain mildly up for the time being as AdStoK lines are now crossing with a strong up gradient.

Market Outlook NDX for Oct 15th '07

Dominant TF: Daily and low time frames (15mins)
Swings: UP-UP-UP
Market direction: Watch behaviour on stall level.

60mins: Up, but resistance at 2188 to be watched closely. Follow lower time frames for guidance.
One should not forget Thursday's incident too quickly, as it may have been costly to some. There could well be more turbulences ahead.
For the time being, NDX will try and hit 2188 again, and we'll have to be very careful as it can turn into a head & shoulder, a double top, or obviously break on the up side.
Entropy is recovering a bit, but lower time frames (not displayed here) are far more hesitant. We are close to a stall level at 2180, applicable to this sudden recovery.

Daily: Up until...
AdStoK is now showing more signs of weakness and significance level is still the highest of all 3 on this chart.
There is so much accumulated energy that one cannot imagine a serious retracement right now, but one could have a pause with some congestion and profit taking. This high volatility environment can obviously accelerate movements in either direction. For the time being, i would recommend keeping an eye on the formation of a clearer pattern (H&S, DT, or breakout) in intraday time frames.

Weekly: Mildly UP until resistance is found
AdStoK lines have now crossed over so RUT may be a little ahead of itself, but significance level is so low at this time frame (divergence) that we should not jump to conclusions. It is almost unthinkable to have a retracement with an rising Entropy.

Market Outlook RUT for Oct 12th '07

Dominant TF: Weekly & Daily, lower time frames joining the party
Swings: DN-UP-UP
Market direction: congestion, possibly mildly Up

60mins: a bit of roller-coaster.
As said for NDX and SPY, this little hiccup was expected a little later, but NDX's madness triggered some selling on stall level, bringing the whole market down.
RUT could test 828 for support first, and 843 is a new resistance which will be harder to break.
One must watch the coming trading range very closely as it could form an interesting pattern (head and shoulder? double top? no panic just yet...)
Note: The gradient of the AdStoK green line should also give us information on whether we're heading for a turnaround or a V shape pattern.

Daily: Congestion to mildly up.
AdStoK is very overbought and is now showing some weakness. The white line crossover will give us interesting information shortly. Entropy is lower but there is no reason to panic: the trend is still UP! Yesterday's down day did not even change the colour of the daily bar, which is still blue.
Current resistance level at 843 is fairly strong then 860 and ultimately 875.
Support: 828 (likely), then 812 (unlikely in the short term).

Weekly: mildly up until...
It was clear RUT would hit 851 (highs + Fib) but what is now coming next? AdStoK and Entropy do not point lower, so one should not panic just yet. RUT is likely to hold or even go higher. Strong MM resistance is still 875.

Market Outlook SPY for Oct 12th '07

Dominant TF: Daily
Swings: DN-UP-UP
Market direction: Congestion. Upward bias still valid.

60mins: Testing support on 154.65. Possible congestion.
It seems that NDX's madness triggered that profit taking on stall level. SPY is also teetering with all time highs so was also subject to profit taking.
Lower time frames seem to confirm that 154.65 has to be tested (MM + Fib). It is too early to anticipate contagion and broad selling pressure.
Entropy is however quite low, so one may enter a trading range [154.50-156-50] for the time being.
Should 154.65 break, the next Fib levels coincide with MM levels: 154, then stronger on 153.15

Daily: congestion to mildly UP.
AdStoK is so overbought that this little hiccup of yesterday had to happen. I personally was looking for a trigger point within a few days, but NDX's quick run to stall level precipitated nervosity and selling.
Entropy is still fairly high, and AdStoK while overbought is not pointing to any strong retracement.
We should have some increased volatility in the next few days, then a direction should emerge as a breakout of the [154.50-156-50] trading range.

Weekly: mildly UP.
The Swing indicator is now more firmly up, but the key swing price level is still close at this time frame.
Entropy is slowly looking better, and the trend should be at least mildly up until AdStoK lines cross.
So, for the time being, no visible change in market dynamics coming.
One will have to keep an eye on AdStoK when lines cross, as there is a chance of divergence in this indicator with lines joining at a lower level than prices (double top later on?).

Market Outlook NDX for Oct 12th '07

Dominant TF: Daily and low time frames (15mins)
Swings: DN-UP-UP
Market direction: UP until ...

60mins: Consolidation around 2125 support level. Possible trading range.
Despite the strong bull run, 2188 was given as an important test level. Selling on that level has been as crazy as the previous rise, and should now stop on 2125.
We'll have to watch that level of course, but preferably in a lower time frame (for entry/exit), or EOD for the general trend, which will both have a much higher significance level.

Daily: Despite yesterday's hiccup, no change in trend for now, but still very very overbought. Possible tug-of-war.
This profit taking session had to happen, and I expected it to happen a little later, probably triggered by other indices.
We however had a special configuration with a strong MM resistance on the 60mins chart at the same level as the MM stall level on the daily chart.
Levels to watch: 2125 and lower Fib levels, but one should not panic as there is still a lot of accumulated energy in the market. NDX could just as well bounce to 2250.

Weekly: UP until resistance is found
AdStoK lines should soon meet, but significance level is so low at this time frame, so this is nothing more than a background information.
One can however notice a divergence, hence there is a possible slowdown on forthcoming resistance and line meeting point (within a couple of weeks).

The Swing Indicator - Part 2

The Swing Indicator

We here have 3 adaptive Swing indicators applied to QQQQ 5 mins, declined in 3 different lengths or Time Frame Multipliers.
The shortest Swing is the white line, calculated over 128 bars. The second one is the yellow line, which with a TF multiplier of 2 calculates swings over 256 bars. The third one is the green line with a TF multiplier of 3.

The Swing indicator also has a Search Depth parameter. In most cases, the default setting (0) will suffice. However, in certain circumstances like a strong bull run, the indicator will obviously 'keep it simple' and bring about a straight line. The user may want to search longer for less obvious waves with a Search Depth parameter set to 1. The plot colour is then a little darker.

Since the indicator focuses on a fixed number of bars, the oldest leg is always incomplete. A future version may be implemented to draw all swings since bar 1, or give the user more flexibility in choosing the number of bars. It is not a technical difficulty, but rather a speed compromise which led to the current design. The Swing indicator indeed uses a Genetic Algorithm to detect pivot points, and can sometimes be computing intensive particularly on low time frames if a number of charts are open simultaneously.

An additional indicator can be added to the chart to retrieve pivot points and calculate Fib retracement and expansions automatically when swing legs show the right characteristics. Please note that communication between indicators, in this particular instance, the swing indicator writing pivot points in shared memory later retrieved by the Fib calculation. The same principle can be applied outside TradeStation, i.e. pivot information can be used in a VC++ program via the API.
More details on the API will be posted soon on a separate site. Contact me for details.

Market Outlook RUT for Oct 11th '07

Dominant TF: Weekly and Daily
Swings: UP-UP-DN
Market direction: Up until...

Note that SPY is the leading symbol in our selection of 3 indices.

60mins: neutral to mildly up.
RUT could just as well break this 843 resistance level or hover a little longer and remain in the narrow 838-845 range. The pivot level has also turned to resistance level indicating more difficulty going higher.
Significance levelis still low, so one should rather follow the daily chart for direction, and look at lower time frames for entry/exit points.

Daily: Mildly UP.
AdStoK is still bullish while quite overbought. It should try going higher until the white line shows some weakness and lines cross (very often indicating a decision point).
Current resistance level at 843 is fairly strong then 860 and ultimately 875.
The gradient of the AdStoK Green Line announces a coming crossover within a couple of days. We may then see some slowing down. Such gradient upon crossing should provide interesting information then, particularly about a possible level breakout or not.

Weekly: UP until...
Entropy and AdStoK now show more clearly the way up to 851, 860 then maybe 875 over the next couple of weeks. The Swing indicator is down again, indicating we are very close to a key turning point.

Market Outlook NDX for Oct 11th '07

Dominant TF: 60mins, Daily
Swings: UP-UP-UP
Market direction: UP until ...

No change from yesterday:

60mins: Up, but very overbought.
NDX seems to be heading for the 2188 level now, and no retracement in sight in the short term. Only an influence from SPX may affect this trend to some extent.

Daily: Crazy, i.e. still up.
Nothing seems to be able to stop the trend which seems excessive now.
Levels to watch: 2188 first then 2250. A retracement on 2188 is possible, maybe triggered by economic news or correlation with SPX which is on a test level.

Weekly: UP until resistance is found
AdStoK lines should soon meet, but significance level is so low at this time frame, so this is nothing more than a background information.
One can however notice a divergence, hence there is a possible slowdown on forthcoming resistance and line meeting point.