Wednesday, November 21, 2007

Market Outlook RUT for Nov 21st '07

Dominant TF: Daily, and 10mins (not shown).
Swings: DN-DN-DN (from DN-DN-DN)
Market direction: DOWN, but support may be found soon (in the 730s if 750 breaks).

In such high volatility environment, lower intraday time frames are doing fine. The picture is however pretty good on this snapshot too.

60mins: Down, but probable congestion on strong support level
MTFS and Entropy look bearish, with congestion potential around 750 key level. One should be careful as if 750 fails to be penetrated on the upside, RUT will fall to 734.5, then 730 (would take more than a day though)

Daily: down, possible congestion on 750 level but...
Entropy is stabilising on moderately low levels, but the bearish MTFS lines have quite negative gradients indicating RUT going lower, thus pushing support level also lower (730?). Definitely no chance of a recovery in the short term. Should 750 break, the next Fib level is around 731 (close to August lows), but this scenario is now becoming quite realistic.

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 also remain in a broad [750-875] trading range with a lower bias (MTFS lines). 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.

Note: we've had a channel since mid 2003 which could break, so we should remain cautious. Breaking 731 would be however alarming.

Market Outlook SPY for Nov 21st '07

Dominant TF: 60 mins & Daily
Swings: DN-DN-DN (from DN-DN-DN)
Market direction: down bias but expect some fighting on 143.75 support or lower...

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

Entropy and MTFS both still 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. No real recovery potential in the short term.

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 141 (Fib) or even 137.50 (MM). However the current fall in Entropy is not too alarming (see LEntBin), so congestion may happen on this support level.

AutoFib already gives potential recovery levels (L1 to L5) if current pivot holds.

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 21st '07

Dominant TF: Daily, but mostly 10 and 15 mins charts
Swings: UP-DN-UP (from 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. Reading the 10 mins chart is very simple with a significance level of 94%

Interpretation very similar as yesterday's

60mins: more or less same trading range [2000-2060] with lower bias

Definite congestion ahead. Bias remains down, so behaviour on 2000 is obviously key.

Daily: Possible trading range with lower bias.
MTFS and Entropy both look fairly bearish and 2000 had to be tested. We indeed have conflicting information arising from the MM level showing a reinforced support level. The MTFS white line has started showing some inflexion, so there will be more fighting on the 2000 support level. 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, or at least a long battle (3 or 4 days min).
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 - 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 retracement level, so it could certainly come a little more down. In such case one cannot ignore that breaking the current channel would accelerate into serious selling pressure, but no panic just yet. 2000 is still holding...