Wednesday, December 12, 2007

Market Outlook NDX for Dec 12th '07

Dominant TF: 60mins (and lower)
Swings: DN-DN-UP (from UP-UP-UP)
Market Direction: Support must be found (2062?) - no change in overall direction just yet.

Yesterday's warning was certainly warranted, and the drop after the Fed announcement was quite interesting to follow on a 5 minutes chart. At this point in time, it pays off to go lower in time frames (all have a significance level higher than these ones)

60mins: high volatility - good possibility of a bounce once support is found.
After indeed hitting a high at 2147, NDX took a bit of a knock to close around Fib PR2 (61.8%). Should this level now break, since there is still some negative sentiment, NDX could well go lower to the 2062 pivot level.
MTFS is again not showing a clear pattern, which may indicate continuation of a congestion in a high volatility environment.

Daily: Up
Despite yesterday's drop, the pattern remains unchanged, and the bar even remained blue. We may have a second down day, but surprisingly one cannot say there is a retracement coming.
One should obviously be cautious, but not bearish quite yet.

Weekly: congested to moderately up
Significance level is low, but NDX is still in its channel, Swing is UP and the weekly bar is not red.

Market Outlook RUT for Dec 12th '07

Dominant TF: Daily, 60mins
Swings: DN-UP-DN (from UP-UP-DN)
Market Direction: Upper bias, but volatility ahead.

Read previous general comments on SPY and NDX. Patterns are different, but dynamics are correlated.

60 mins: RUT should stabilise on support level
RUT first hit its Fib target but then ended the day much lower on a strong intraday support level (765.63). Since there is still some negative energy to dissipate, it may go lower or at the very least remain in a congested trading range. Should the current level break (which is not visible right now) the next support level would be 750.
MTFS is not very bearish right now, but definitely indicates a lower bias.

daily: up & bumpy
We've now got the little bit of volatility we've expecting for a few days. The overall up pattern remains unchanged in the short term.

weekly: Directionless for the time being
Same situation: range [750-875]
Swing turned back down indicating RUT is not out of the woods just yet. Current congestion still hides a down bias. A weekly up bar, and if not blue, at least yellow, would confirm a safe return to the trading range.

Market Outlook SPY for Dec 12th '07

Dominant TF: Daily and low intraday time frames
Swing: DN-UP-UP (from UP-UP-UP)
Market Direction: No change in overall direction.

Similar comments as NDX.
Short term intraday traders must have smiled ear to ear

60mins: Support must first be found (~147)
Reaction to the Fed announcement was stronger than expected, and support may now be found on recent lows around 147. MTFS lines have crossed and look bearish in the short term, but one should wait for the pattern to form over the next few bars (maybe up to a day).

Daily: up technically but a support must be confirmed.
Yesterday's comment was quite valid. Now, MTFS and Entropy have little changed after yesterday's down day so one should expect support to be found and SPY to bounce up again.
A word of caution though: SPY about hit its Fib target before the fall, so last pattern can be seen as completed and a new down leg could start. Secondly, we may have congestion around pivot level for a while, so even if we have a bounce soon, behaviour on 150 will have to be watched carefully.
I also wish to remind a comment made over a week ago. Such MTFS crossover was not indicative of a stable recovery pattern, and we did not 'get' our retracement to confirm a return to the up trend.

Weekly: Congestion to upper bias
MTFS is unreadable because of the low significance level, hence one should not pay too much attention to the lines down gradients.
For the time being, higher highs and higher lows are bullish signs, with due caution that moves in the last 6 months have been way too fast for this time frame.