Tuesday, November 20, 2007

Market Outlook RUT for Nov 20th '07

Dominant TF: Daily, and 10mins (not shown).
Swings: DN-DN-DN
Market direction: DOWN, but support may be found soon.

60mins: Down, but probable congestion on strong support level

MTFS and Entropy look bearish but 750 should hold implying a probable congestion. Some short term recovery is also possible.

Daily: mildly down, possible congestion on 750 level.
Entropy shows signs of bottoming out, and the bearish MTFS lines despite having negative gradients (indicating RUT going lower) could join soon. No chance of a recovery for the time being.
Should 750 break, the next Fib level is around 731 (close to August lows), but this scenario is less likely at first.

Weekly: congestion to mildly down

At first sight it looks like we had the anticipated double top. However, one should not jump to conclusions just yet, as we may have a broad [750-875] trading range. The 750 level has indeed turned from pivot to strong support level. In addition, we have a PR2 Fib level around 740 and RUT has in the last 2 years always bounced back on PR2, so there is no reason it will behave differently this time.

Market Outlook SPY for Nov 20th '07

Dominant TF: Daily
Swings: DN-DN-DN
Market direction: down, til next support level...

Note: Significance level is 'alright' albeit much better in low intraday time frames.

60mins: Down, unless current MM pivot level holds.

Entropy and MTFS both point down or just a congestion within the current trading range. Lows around current pivot level (143.75) have been tested. We now have to see how the MTFS bearish pattern develops until lines meet.

Daily: Down, but check support levels.
MTFS and Entropy do not look good and at this stage it is likely that the fall will continue until MTFS lines meet. MTFS may indicate a congestion around current lows. SPY could eventually fall further to 137.50. However the current fall in Entropy is not too alarming (see LEntBin), so congestion may happen on support level.

Weekly: congestion to mildly down - very low significance level.
This time frame has such a low significance level it is almost pointless reading it. We can only rely on the Swing indicator as well as MM and Fib levels. For the time being, it is safe to say that we are in a broad trading range with a down bias. If 143.75 fails to hold, SPY could well also test the 137.50 level for a 3rd time...

Market Outlook NDX for Nov 20th '07

Dominant TF: Daily, but mostly 10 and 15 mins charts
Swings: DN-DN-DN
Market direction: Congestion to down. Behaviour on 2000 will be key.

I repeat the same caveat: Dominant time frames are now shorter intraday time frames , so obviously only users of the TS technique can fully appreciate current dynamics. The 2015.63 support level held, giving bulls some hope the worst is over.
A short term recovery is possible, without affecting the overall direction.

60mins: more or less same trading range with lower bias

Significance level is down again at this time frame, so a divergence is likely to occur. For the time being, the MTFS pattern indicates a trading range with a definite lower bias. NDX should test 2016 again, then 2000. That level is far too anticipated though.

Daily: Possible trading range with lower bias.
MTFS and Entropy both look quite bearish and 2000 somehow has to be tested. We however here have conflicting information arising from the MM level which shows a reinforced support level. The MTFS white line has started showing some inflexion, so there will be some fighting going in and a a trading range with a lower bias is likely at first. Please note that the MTFS pattern has to complete with lines joining almost always in oversold territory. This indicates a potential to go somewhat lower.
Further down the line: If 2000 breaks, we have a possible 1935 target later on. On the other hand, should the latest pivot point hold which is quite possible since 2000 is now strong support, we have our AutoFib showing a potential recovery to levels we have seen recently (target levels displayed on picture).

Note: LEntBin has been momentarily added to the chart. It helps assess the importance of the current drop in Entropy in relation to historical levels. We can see that the current level -5.33 is in fact not so alarming.

Weekly: congestion to mildly down - very low significance level.
We knew we had to watch for that growing divergence, and Entropy peaking. Now, there is still no overall change in direction and this profit taking is only healthy after such a bull run. We have recurrence of the 1935 level, so it could certainly retrace a little more. Speed is however difficult to anticipate in this high vol environment.Again significance level is so low one should not jump to conclusions too quickly.
(Note: Swing's search depth turned to 'refined')