Quick sands...

Tuesday was a down day as expected. EURUSD broke the support level to settle on the next support just above 1.25 which should hold today. A bounce would likely be contained below 1.26

ER: I mentioned yesterday that ER would try and find support somewhere above 482. There we are now and even if we could see some reprieve today or even a minor bounce, 500 has now been tested again as resistance and we could actually go lower in the next few days. Indicators however indicate more a drifting situation than an outright fall, so this support (or the next one) can hold.

ES: Same situation with a support level aroun 890. A short term bounce is possible but here again, the drifting continues...

Oh well, just another day...

Will this ever end... ? Have buyers decided to enter into hibernation already ? No, one should not dispair and a trading range is a good way to slowly dissipate sellers'pressure. Obviously, there is still some 20% risk of a fall to the 700s on ES, but a support should be found near current lows.

Let's have a look at our charts:

EURUSD: 1.2695 is a good support with a limited bounce potential. The trading range is now reduced to [ 1.27 : 1.29 ] with a lower bias.

ER: We have 500 slightly penetrated, but that's not a problem since we have multiple support levels on 500, 496 and even 482 so the market will probably settle on one. While sellers'pressure is there, there is no indication of one of those support levels breaking.
No bounce either...

ES: Same story, but downward pressure is a little stronger. Last week's lows 900-905 could be tested again or even hit a target on 890-890. No major fall expected though.

Weekly Report on ES - Nov 10th to 14th '08

Last week, the report was announcing the 1000 battle, but i certainly expected a bit more action there. Anyway, better luck next time...

ES 60mins: same hurdles just below 940 and then ~965
We do not have a strong indication of a new round coming on Monday, but we may get there in stages testing ground. First step would be to confirm 940 as support.

Daily: Aren't we all a little tired of this all?
While we start seeing some upper bias in this market, there is certainly not enough energy to even think of passing 1000 in the short term. Will we gather forces or will market players heal wounds and rest a bit in this trading range? We'd all love to turn the page and be bullish again but who's pulling the trigger first?
Like everyone, we have to be very cautiously optimistic this week again.

Weekly: possible bounce but...
Some indicators show a bounce coming but at the same time do not anticipate enough energy to carry through to any sort of full strength recovery just yet. It could take a few more weeks, so we'll call it a pre-alert or early warning and will check lower time for confirmation as signal later on. Please don't read more into these lines: we are NOT buying yet!


NB: Like for ER, daily updates will be posted on this blog this week again.

Weekly Report on ER - Nov 10th to 14th '08

Dominant TF: Daily, 60mins with the weekly chart naturally a little behind in this volatile environment.
Swings: UP-UP-DN from UP-UP-DN (have we bottomed ??)
Market Direction(daily): some will take a chance going long with a stop below recent lows.
Options (RUT): put spread / split butterfly still a reasonable option but caution is required. Nothing with taking profits now.

Last week monday, i clearly mentioned a "cautious retracement trade" was possible, like a put spread or a split butterfly. We certainly had no indication of a strong bounce just yet. Hmmm, can we really say more this week? Dynamics are still the same, so is our word of advice to follow charts on shorter time intraday time frames.

Now, let's have a look at our charts:

EURUSD: I was almost spot on last week saying we had a clear support and yet only limited bounce potential to 1.29. Again €/$ should remain fairly range bound in the short term with a slightly lower bias (no indication yet of ~1.2695 support level breaking). Upper resistance remains around 1.293. Long term we still have a possible target around 1.22 almost hit already on Oct 28th, should this 1.27 key support level break eventually during the course of the week. This ~2cts range is however relatively tight and we should therefore remain cautious of breakouts in either direction.

ER 60mins: support must be confirmed or...
Playing a dangerous game again around key 500 level. Our chart shows limited bounce potential and yet at the same time does not indicate that level breaking (c.f. MTFS). We'll have to remain cautious and review our scenario using a shorter time frame. For the time being, since swings are 'up' we can always try a long with a tight stop below recent lows. Breaking the first Fib retracement level could level to a recovery to the 560 area (see daily below)

ER Daily: Key 500 level!
There is no guarantee 500 will hold, yet it is likely to do. There is still some remaining downward pressure which could dissipate to open the way to a target around 560. We'll keep checking price segments about 32 points apart. Should 500 break, price segments work the same on the way down with a support on recent lows exactly 2x32 points lower. For the time being, "hangover" mode still prevails though, so ER could remain range bound for a few days.

ER Weekly: ?
Significance level is lower so we will not pay too much attention to MTFS and Entropy. However a straightforward recovery (blue bar) is very very unlikely. We have to admit this crisis has surprised us already but there is nevertheless still a tremendous amount of downward pressure to dissipate, so it is way too early to rejoice and buy frantically into this market even if we may have an up week this week. We must keep at the back of our mind that if 500 and 440 break, the TRUE support is around 380. Sounds frigthening doesn't it?
Again, we'll have to keep this time frame as background info only for now and follow the 60mins charts rather.

ON ACCOUNT OF THIS EXCEPTIONAL MARKET SITUATION, DAILY UPDATES WILL BE POSTED ON THIS PUBLIC BLOG THIS WEEK AGAIN

T.G.I.F.

Just a gentle reminder that a swallow does not make a market rally (euh?) and i warned that the "1000" battle on ES would not be an easy one. I'm afraid we'll need at least another round and for now we'll have to see how and where buyers gather forces...

EURUSD: As mentioned yesterday, we have a strong support level just below 1.27 and while we have some bounce potential at this point, the underlying forces should keep some pressure on any substantial recovery.

ER: We're now sitting on 500 with some remaining downward pressure. However the market will try and dissipate that energy without breaking that support level. Should it break, the next level is 483, but odds are more in favour of a bounce right now.

ES: The fall stopped on Fib PR2 and we're back into a [906-937] price segment, and as a matter of fact, we'll have to break that 937 level to go higher and eventually battle again. We're not there yet though and we should end this eventful week on a relatively uneventful day, probably slightly up. Time to heal the wounds now...

"Sell the news"

We're all happy for America, and yesterday's retracement doesn't do that extraordinary day any justice. Markets dynamics were widely anticipated, so no surprise whatsoever. Now let's see what charts tell us today:

EURUSD: taking a breather, but 1.27 is a strong short term support for now. We don't have any significant forces taking €/$ either way in the short term, but this drifting should continue for now.

ER: Volatility is certainly still around and retracement was stronger than anticipated. It is now in oversold zone, so not clear whether the 500 level will actually be hit. There is no reason to believe ER would actually go lower, and if one goes back to previous reports, one may actually be in the predictable situation of the 500 area being the actual start of a better looking recovery.

ES: Same scenario here, where 937 being so anticipate that it could bounce anytime. Obviously, if the bounce does not happen, things could get very wrong (bearish outlook to the low 700s already mentioned a couple of weeks ago). Probability is however low.
We're now back to a more normal trading environment with price segments in place (32 points wide). Recovery can therefore bring ES back to the high 960s, to then in the medium term attack 1000 again...

... to be continued ...

"Yes, we can"

Great day for America and for the world at large. Not much of a surprise, but a great day nonetheless. Difficult to gauge the short to medium effect to the markets as this is virtually a non event i.e. been priced in already, but we can probably assume the worst is over even if we're now in for a long convalescence.

So, is this going to be just another day today?

EURUSD: taking a pause right now, but swings are clearly identifiable on the 60mins chart. Over the medium term, the US$ should weaken a bit the the next Fib/MM level.

ER: also taking a pause at stall level just south of 550. Difficult to say whether the market is ready to test 562, and as we all know the adage says "buy the rumour, sell the news" so we may just see some retracement today. Shorter time frames will help with determining a direction for the day. Mid term, i.e. by end of week, it is clear that we have to test the 562 level.

ES: Here the 1000 level has been already hit, and we have a target in the 1000-1010 range so it is difficult to anticipate what's coming next except these are serious resistance levels. No offence to the new President Obama, but the markets may not necessarily rally as much as voters and citizens of the world on this new dawn for America.

Obama Day

Are we waiting for a big Obama party today ? Are we confused between this early market recovery while the mess is not fully cleaned up still ? Is it yet another eye of the storm ? Yesterday was certainly calm in relation to the volatility we're now almost used to, except maybe for €/$ which broke the 1.27 MM support level to reach a Fib target around 1.255.

EURUSD should carry on hovering around same levels, and we recommend using a tick chart for intraday movements. The lower bias is still there at the moment but as said earlier, it could well bounce because 1.27 is actually stronger than the deep penetration we've seen could imply. If now tested as resistance then we will look at a lower target maybe back down to the 1.22 levels.

ER: Stalled short of 550, on its way to 562. A retracement would be in order but ER is holding nicely at these levels. One cannot discard either scenario right now, so ER can just as well go and test 562 or retrace back to low 500s again. In the short term, ER is still pushed slightly upward but the bias is fading at the moment. Will volatility play tricks again on Obama Day?

ES: If we try and make an overall picture of the markets, ES is not so bullish and is certainly indicating a need for a lower time frame. Secondly, MM resistance level has come down so we may find difficult to even come closer to the 1000 battlefield. Are belligerants ready for it? The target is there, but here again are we going to retrace first? Like for ER, we still have a very weak unconvincing upper bias for now...

(snapshots available on request)

Weekly Report on ES - Nov 3rd to 7th '08

Markets are again largely correlated so we again always recommended reading this report in conjunction with our latest ER report below. Dynamics are indeed similar except that we may be tempted to look at shorter time frames such as 30mins. In terms of levels, we do notice a bottom last week on MM stall level (60mins) where it was even clearer on ER, but the picture is clearer overall, and we now have to gauge whether the market is now ready for the "1000" battle...

ES 60mins: on stall level
ES is slowing down on stall level (~968) as we could expect it. We may lack sufficient energy to reach 1000 this monday but this will happen sooner or later anyway. We'll check Fib/MM levels both from this stall level as well as from 1000, and our MTFS/Entropy shall tell us which we to navigate. A lower time frame will also be helpful here.

Daily: Preparing for battle
1000 is now around the corner. However, at this point in time, we don't see ES sailing through that important level and some retracement on 1000-1010 seems inevitable. Such retracement could send prices back to current levels, so we may have high volatility, wild swings... to maybe end the week almost unchanged. We'll follow the possible scenario day after day anyway.

Weekly: no rejoicing just yet!
We still have no evidence whatsoever of a forthcoming recovery and current volatility may cause amazing whipsaw movements. We have to remain very cautious if we want to invest long term. This is a time for intraday traders...

NB: Like for ER, daily updates will be posted on this blog this week again.

Weekly Report on ER - Nov 3rd to 7th '08

Dominant TF: Daily, 60mins with the weekly chart obviously a little lost in this environment.
Swings: UP-UP-DN from DN-DN-DN (have we bottomed ??)
Market Direction(daily): cautious retracement trade, i.e. a backlash is still possible
Options (RUT): good time to sell a put spread, but staying on the sideline a little longer is also fine

Last week monday, we had that moment of hesitation between a 500 level that wasn't technically broken, stretched to the limit because of the extreme volatility we've been going through... and a continued down pressure that anticipated a much lower target. We therefore recommended to stick to the 60mins chart and possibly even lower. The 60mins chart indeed confirmed a strong support level around 440, which triggered some substantial short term buying.

We still have some uncertainty regarding the effect of deleveraging on the markets now, so it remains difficult to anticipate a strong recovery. We shall therefore remain cautious this week again.

Now, let's have a look at our charts:

EURUSD: €/$ came very close to MM stall level, bounced, and now found support on 1.27. We now have a first target on 1.29, and while we still have an upper bias, €/$ may hover around low levels for a while. Again, deleveraging and banks recalling US$ loans massively can cause the US$ to strengthen further. We all know the amount of US debt could and even should send the US$ to recent lows so... again caution must be exercised on our usual time frames. We will stick to the 60mins (and lower) charts this week again.

ER 60mins: stall level in sight.
We've seen a good recovery and a target is now close. ER should hit the MM stall level just belo 550, or even MM resistance later on (~562)
Again volatility keeps on playing tricks on us, so the normal subsequent retracement could happen this monday, or by mid week. 500 would be a good support to take prices higher.

ER Daily: are lows behind us ?
We now have substantial evidence to believe so and we have a target price (563) which is exactly on the 60mins resistance level. On the medium term though, we need more energy which could be found on a 500 support level again. We have the US elections tomorrow, so market dynamics may obviously be somewhat affected. We will be cautiously optimistic and look for buying points this week. We can always set stops below 500 in case a forthcoming recovery fails this time again.

ER Weekly: ?
Significance level is lower so we will not pay too much attention to MTFS and Entropy. However a straightforward recovery (blue bar) is very very unlikely. We have to admit this crisis has surprised us already but there is nevertheless still a LOT of downward pressure to dissipate, so it is way too early to rejoice and buy frantically into this market. Again, we'll have to keep this time frame as background info only and follow the 60mins charts rather.

ON ACCOUNT OF THIS EXCEPTIONAL MARKET SITUATION, DAILY UPDATES WILL BE POSTED ON THIS PUBLIC BLOG THIS WEEK AGAIN

... going with the flow ...

Is the bottom behind us? I've been undecisive lately as it can be so, or at the same time, we may still see a full-on purge to the low 700s on ES. We have certainly seen some improvement, now let's have a look where it could lead.

Note: there will be no report tomorrow, but i'll try and post a short update on market close.

EURUSD: good recovery and resistance have been broken leading the way to 1.32 ... or even all the way to 1.37 ! Our MM stall level (~1.22) was not quite reached and our scenario is now updated to a possible return to 1.27 Obviously, we have conflicting pressure from deleveraging currently strengthening the US$ and the phenomenal amount of public debt which should weigh on the US$, so volatility is here to stay in the short term.

ER: Testing 500 now. Is it going to break it...? Probably not, but who knows. Most would be long now (60mins chart) and would just tighten stops a bit just in case. It is so far only a retracement trade (contrarian) on the Daily chart. Again, on a middle term outlook, ER is likely to go lower at least once more.

ES: Are we now going for the big "1000" battle? Possible... Again, one should only go with the flow. 967 is a MM stall level that was hit yesterday, so we'll watch that level again today. One could then either try and hit 1000 or just as well retrace back to 930s.

Keep an eye on shorter time frames, and watch out for more volatility on GDP Q3 announcement tomorrow.

... a ray of light ...

Oh well, yes, i got it wrong yesterday. It does not happen too often, so i won't take it too badly. We had a support level around 843 on ES, and a pivot level around 875 and those levels were cleared marked on our charts. What happened was a sudden breakout effect to the next resistance level. This is nothing new and charts reacted very well. Regular readers now know that we always have to analyse those price jumps in the light of quantum dynamics, i.e. prices being attracted to predefined levels.
Secondly, i repeat again that high volatility acts as a time compressor which requires looking at shorter time frames. This is also why i still publish daily updates on this blog dedicated to weekly market reports, and it is sometimes not even enough.

Do we have to now jump and buy frantically? I'm afraid not. But let's first have a look on our charts:

EURUSD: We have a target around 1.27 to 1.274, and we have to see whether 1.27 will now act as a support to go higher. It is unlikely though. This bounce is likely purely technical. We keep our mid term objective in the 1.22 area, with continued volatility. A bottom may be near.

ER: Nice rebound to Fib PR1. Obviously one would need to see 500 passed and even tested for support to see a change in trend. We may have a 2nd up day but no major reversal right now even if again volatility plays tricks on us.

ES: Levels are even clearer here, with 930 being a strong resistance ahead. There could be some carry-through, either technically motivated, or from some start of herd effect, but we're not out of the woods yet, and there will be opportunities at cheaper prices still.

Over the longer term, we know we have an absolute bottom either around 843-875, i.e. just behind us, or in the low 700s still. The massive amount of negative pressure has to dissipate in one way or the other, with a much awaited decrease in volatility. This has to take at least a few weeks and possibly until the end of the year. Difficult to say whether markets will sink or hover, but the clear buy signal later on will be the test of 1000 on ES. We may have a few interesting battles before we count the dead and feast among victors...

(Snapshots available on request)