Tuesday, September 30, 2008

Black Monday

Yesterday again I warned to be cautious and even to stay away from the market. Intraday trading was about OK in the morning but prone to execution problems.

What can we expect for tuesday?

ES: prices found some support on 1125, the MM level even if penetrated, can be regarded as holding. Having said that, it is clear that a LOT of uncertainty remains in the market and a lower bottom is possible (1070?). After yesterday's shock, a technical bounce is likely even if not visible yet.

ER: Same - Despite the bloodshed, it seems there is also a support level here (656 on MM, 645 Fib), and also a lower stronger level at 625.

Again, I recommend staying on the side line until volatility comes back from stratosphere.

Sunday, September 28, 2008

Weekly Outlook for ES - 29 Sep to 3 Oct '08

Dominant TF: weekly, 60mins with Daily lagging behind
Swings: UP-UP-DN (from UP-DN-DN)
Market Direction(daily): short or preferably flat. Following intraday time frames is most recommended, but staying on the side line is fine too.

Oh well... true, i saw a 2 segment retracement to 1219 before monday last week, and to no surprise, volatility brought it down even further to tease the 1180s again. The good thing is that the 60mins chart always responded nicely. Lower time frames behaved like a charm too. Now what to expect? We'll stick to a still negative bias overall with a high probability the worst is behind us. Does that mean a recovery is under way? If so, it is still well hidden.

ES 60mins: stil range bound
Again we recommend lower time frames here. on this chart, we'll watch the 1219 resistance which could at last open the way to 1250. Until then, we can only expect more of the same uncertainty... We've got a slight upper bias for now, so we may have not to wait too long.
(UPDATE 6AM: bailout finalisation is jittering markets again - Will post a new report later today when support is visible - Could return to recent lows )

Daily: ? ? ?
Entropy is improving but no clear pattern otherwise, and this until the 2 spikes are fully digested. I would recommend waiting a few more days for volatility to reduce. Bars are still yellow after all, and so do not express any strong recovery yet.

Weekly: Congestion to lower for now
Still some negative pressure here despite higher lows. The market may congest below the key 1250 level which remains crucial to a long term rebound.
The market could certainly stay in "hangover mode" for a while...

Weekly Outlook ER - 29 Sep to O3 Oct '08

Dominant TF: 60mins, Daily, then Weekly (shorter intraday TFs recommended)
Swings: UP-DN-DN from DN-UP-UP (from UP-DN-DN the previous week) expressing how hesitant the market is at the moment
Market Direction(daily): flat
Options (RUT): Vega is sky high but no change to our condor positions.

Last week I cautiously warned to wait for the drifting to stop on a strong support level. We've touched it now at 688, exactly where anticipated, yet we have no indication of a solid recovery coming in the next few days. I even doubt any news from Washington DC can really bring confidence in the market in the short term.

EURUSD: €/$ is also hesitant with $ making some gains to a target level around 1.457 that was quite visible in intraday charts. On our time frames, there is a chance 1.464 acting as a strong resistance in the short term and $ then making further progress. In absence of shock, congestion would be the favoured scenario. Knowing the bailout plan is about to be finalised, a shock is inevitable and a breakout either way is possible. I shall again revert to a 233/610/1597 tick charts until we retrieve some visibility.
(UPDATE: Monday 1AM Eastern - the breakout occurred on bailout plan approval. Support level is now 1.4404)

60mins: congestion - slight upper bias
After bouncing on 688, ER reached the highest boundary of this price segment, the next one possibly taking prices to 719. Yet, we have no indication of much energy capable of taking ER to the high 710s, and certainly not higher than the next segment boundary i.e. 719,(again unless new surprisingly positive information on the bailout plan shakes current dynamics).

Daily: better stay away from the market for now...
Despite the high volatility environment, this is still a drifting environment we're having at the moment. The good news is that 688 may be the support level the market needed, the bad news being that there is no real buying at this stage yet despite the trading restrictions. ER could therefore congest with some price bursts here or there until volatility subsides.
We'll gradually watch Fib retracement levels being passed and eventually wait for 750 to be tested again to celebrate...

Weekly: congestion - HIGH volatility
After 2 extraordinary weekd in terms of volatility, we'll watch the market calming down and 750 being passed to ge back into it.
Obviously, it's not so bad for condor players like us at the moment despite the sky high vega. It may sound a little too early, but one can start thinking about tuning positions a little more delta positive.

Friday, September 26, 2008

End of another wild week...

Hello again,
Yesterday's general comments are still valid, i.e. shorter time frames are recommended as our visibility of 3 to 5 bars may sometimes be reduced in times of high volatility even if the outlook is overall correct. For instance, if we analyse yesterday's movements on ES, charts expressed an upward movement (strong open), yet the first 60mins bar closed around the upper boundary of our price segment (~1205), we then saw an excursion all day to the top of the price segment above to even reach the mid 1220s. ES closed lower and even lost about all gains in post market trading.
This is typical of a high volatility environment, but this warning should not affect our outlook overall. The general market dynamics stay the same.

EURUSD: We spent the day on shorter time frames where we watched the 1.464 level being tested over and over. We updated our support to the 1.4557 MM stall level very close to yesterday's lows. The bounce brought the €/$ more or less where it previously was and we now expect much of the same today with a slight upper bias.

ER: Not much movement here. ER tried to move to a higher price segment, but closed the day hovering at the boundary (~704), and sank in post market. We therefore expect a continuation of the same drifting situation and anticipate the market to test a strong support level. At the moment we canonly hope 688 will be that one. Again, it will take a long time to digest the current volatility.

ES: Same situation with the same ongoing drifting looking for a support level (1188 for now), and hoping for volatility to subside at these time frames. The hangover period is probably going to be very very long and we again recommend moving to lower time frames or stay on the side line for now.

(snapshots available on request)

Thursday, September 25, 2008

Quick update for Sep 25th

Due to the current volatility and uncertainty of the market, i shall post a few more quick reports on the public blog. Please contact me still for other symbols.

The general commentary remains the same: move to shorter TFs for a bit of fun or stay cautious if using our 60m/D/W charts. The worst may be over, but the hangover effect is still there for a while...

EURUSD: After testing 1.464 all morning to a very soft response, the market decided to look for a support on 1.46. Again, no surprise but did we get the extra push to reach 1.495. Not sure in the short term, but we'll get there eventually. At this time frame as well as daily, we'll keep our UP bias.

ER: What will stop this endless drifting? The market decided to test another price segment and we're now on our way to 688. The good thing is that this support level is significantly stronger, but the downside is that there is no sign of a bounce yet. That's good for our options condor anyway, so we won't complain.

ES: The shock we had last week impacted ES more than the larger market, and it appears that while ER tried to catch up yesterday, a support around 1188 (same segment) is holding. A technical bounce is quite possible here but like ER one should not build undue expectations in the short term. ES should stay in the same price segment (<1204), and 1219 looks very strong.

(snapshots available on request)

Tuesday, September 23, 2008

Mid Week Update

ER: Retraced to 704 as expected (see yesterday's report), and could actually drift lower still but we'll give a possible bounce a chance on this support level even if there no such indication whatsoever yet (bars are all solid red still).

ES: ES retraced deeper than anticipated. Like ER, it could technically bounce here, and like ER, there is no indication it will do so yet. It may take a long time for prices to settle even if the overall bottom is probably behind us now.

EURUSD: bounce on 1.464 or 1.46 is very likely.

(snapshots available on request)

Catching up on the Weekly ER Report

Dominant TF: 60mins, Daily, then Weekly (shorter intraday TFs recommended)
Swings: DN-UP-UP (from UP-DN-DN) strange isn't it...
Market Direction(daily): flat or long (intraday recommended)
Options (RUT): Vega is sky high but no change to our positions

Sorry about yesterday. ER became TF and I reacted a little too late for the open. ER is close to ES anyway, so besides specific levels, dynamics are the same and and market reading similar enough. Here is a shorter report for the rest of the week.

EURUSD: I mentioned gong long on € but the retracement to ~1.47 seemed remote still. Forex also went a little wild so no surprise the € strengthened even we saw it breaking the resistance fairly easily. EURUSD should retrace a bit and now stay above 1.464 (first target is ~1.47) and eventually climb back to reach 1.495. A period of congestion is also possible as we anticipate volatility to subside a bit in the next few days.

60mins: profit taking - retracement
Restrictions on short selling must be impacting trading even if we don't quite see its full extent here on futures. To no surprise, 750 was a resistance too strong to break, and profit taking was obvious. We now see prices possibly stabilising in the price segment above 719, or more likely in the segment below ([704-719]) as there is still some negative pressure to dissipate in the first few bars of the day.

Daily: hmmmm what now....?
Last week's post expressed concern about prices drifting to 690, and volatility even brought prices lower to 675. Now we have to wait and see where prices will settle. Indicators have taken a bit of a knock but seem rather positive, so again we can assume a support to be found and prices eventually testing the almighty 750. It can take days though.

Weekly: upper bias in an extremely volatile environment
Our indicators show how painful it is for ER to try and pass 750. Like last week, we'll rather watch shorter time frames taking in consideration a possible breakout effect. In the short term, uncertainty and volatility need to settle, so the more aggressive investors will jump in now, others will wait for the 750 confirmation.

Sunday, September 21, 2008

Weekly Outlook ES for Sep 22nd to 26th '08

Dominant TF: weekly, with 60mins coming back
Swings: UP-DN-DN (from UP-DN-DN)
Market Direction(daily): short or flat

ER has just been delisted from the CME
We need to sort out access to ICE to keep our charts up. Sorry for the inconvenience.
Note: despite being hit by vega, our October options position remains unchanged.

I've already commented this crazy week on a day by day basis. This was certainly the only way to sail through the storm. You'll notice that it is also in line with our significance level, favouring either the weekly chart or the 60mins one. Now let's see what's in store for monday. I shall comment the market on a daily basis on this blog until volatility settles a bit.

EURUSD: Last week's report was quite correct overall. Obviously we've had a few interesting swings on the 60mins chart, but since this weekly report focuses on the daily chart over the next few days, we here see a resistance level around 1.453 then 1.464. We have no indication of further gains even if there are concerns that the Fed & Treasury emergency plan will cost so much that it should ultimately weigh on the US currency.

ES 60mins: still a strong resistance level ahead...
Let's not come back on this wild rally and just focus on volatility which will remain VERY high for at 2 days. Prices should technically also settle on the first Fib retracement level and tease the 1250 level, but it is not possible to fully anticipate the effects of the 10-day ban on short-selling. From a pure dynamics point of view, 1250 remains a crucial pivot level. ES could retrace 1 or 2 segments (i.e. to 1234 or 1219), and will need to pass and test 1250 as support to engage into a bullish trend.

Daily: ? ? ?
What happened last week is clearly a spike at this level. Last week's caution warning is still valid as the model must digest the spike over a few days. We'll revert to the 60 mins chart, which displays a higher significance level anyway.

Weekly: Congestion to lower for now
Here again, i warned of lower lows, and the advice was certainly 'spot-on'. Despite the formidable recovery on Friday, the current trend remains still down technically, and again the 1250 level is key to forthcoming market direction. Obviously new market regulations on short-selling could allow ES to pass 1250 etc, yet if one just reads the chart as it is, more time and effort will be necessary to dissipate a lot of negative pressure still accumulated overt time.

We shall follow shorter time frames carefully until MTFS and Entropy both look healthier. We're certainly not out of the woods yet...

Friday, September 19, 2008

What a day !!! (Episode 2)

What did i say yesterday about wild swings? Whoever predicted the 1PM turnaround before market open was a true psychic... Lots of talks to try and reassure the market, lots of intervention from central banks, and high volatility on witching day... enough to want to stay on the sideline! Anyway, no rest for the braves, so let's have a look at the situation for today.

ES: Gained 100 points between 1pm and 8pm (left charts open after the close on this special day). This is simply MAD! I don't think i've seen that in 15 years...
Now what's coming next? Well it's going so fast that we have to watch lower time frames. Resistance level there is 1234 and 1250. A lot of operations due to witching day pushed prices away from equilibrium which will be found early today. Coming back to our regular segment analysis, even if we jumped a few yesterday, we are now in the 1219-1235 segment, so we'll watch the 1219 support level holding in case of substantial profit taking. Taking into consideration that segments can themselves be split in two, we also have an intermediate level at 1226.
Our 60 mins chart and our Daily chart go exactly the opposite way with the 60mins being more significant, hence we'll follow the remaining upward momentum until it finally fades. Over the longer term, the Daily chart will obviously prove right, and the pattern there will be complete by then. A period of congestion may follow. We'll obviously review all this in our weekly report this coming weekend. For now, yesterday's support held and we're away from danger zone for now... let's just trade like nothing happened...

ER: I have no superlatives for yesterday afternoon price action... All very similar to ES, so i won't repeat myself. We'll watch 719 holding in case of some substantial (and perfectly rational) profit taking today. Ultimately, when things cool down, we'll have to clearly pass 750 to call these volatile moments 'history'. For the time being, let's just follow intraday time frames. Again, 719 will be key level for today's market direction. In case of some congestion, we'll watch that ER stays in the same price segment.

EURUSD: another crazy crazy day again here. Prices paused indeed for a while, tried to break the 1.44 level again to then fall at 1PM, exactly when the prices reached a brand stall level above 1.45. Nothing wrong with that except everything happened in 'fast forward' mode...
Now we have a pattern that is trying to complete while prices are now sitting on a 1.461 pivot. The downward momentum could take prices a little lower or stay a little above pivot level until ready to bounce. There is some downward pressure on the daily chart waiting to dissipate.

Thursday, September 18, 2008

What a day !

Again i invite readers to take a look at yesterday's post to realise it was correct... until lunch time! The markets are so wild that we have a very short visibility at the moment.

Let's have a look at the situation for today, taking into account Oct futures and options are on their last breath, meaning we could have some wild swings again.

ER: for the last few days, the salient support levels are 675 and 689 (cf. previous posts). It is ESSENTIAL that 689 holds, otherwise the road will be open to 656, 625 etc. No panic though: while bearish, a support level is likely to be found.

ES: Similar even if more bearish looking (more exposed to financials), ES must also CRUCIALLY hold the 1165 level. The problem here is that there is more indication of ES going further down even if 1165 looks pretty strong. We'll therefore give it a chance today. Next levels are 1100, 1050, 1000... Some doom-sayers look at this market as the double top of the century (2000 and 2007) sending market to the floor eventually... Let's just hope depressives will stay quiet now...

EURUSD: Yesterday's post was correct until lunch time where the Euro gained 3 cents in 1 hr. This is absolutely crazy (other forex pairs also had their wild moves). This retracement to 1.44 could and even should pause for a while (strong resistance level). We'll have a deeper look into it in our weekly report, but it seems that it could remain range bound for a while, or break out to the 1.465 - 1.47 levels in the next hmmm week, 2 weeks? Volatility is so wild that it could happen any time actually.

Safe trading to all,

Wednesday, September 17, 2008

Mid week market commentary (Wed Sep 17th)

There are many many sites, many trading gurus out there giving you market advices. Most are wrong or evasive, most have inflated egos. Without being overly cynical about it, a market for worthless information exists only because there is demand for it...

Anyway, let's come back to yesterday's post a minute: I gave the 687.5 support level on ER admittedly penetrated to 680 without breaking. I'm not going to explain MM lines again, but it was clear only minutes after the open that the level would hold. The braves even bought ER below the technical support level. After the 1st run, 687 had to be tested again for support etc. ER climbed 2 segments in a day. All in all, a very classic, very very profitable day.

ER: now testing the high end of its price segment with remain upward pressure, yet some profit taking is inevitable today. Again, one can take short term profits and swing play short time frames. It is far too early to confirm we're out of the woods and a return to 703 remains possible if not necessary to climb again later on.

ES: Who could tell you ahead of time prices would reach 1165 and bounce from there. Yesterday's low was 1163 to be exact. Anyway, enough boasting... Similar scenario as for ER maybe only a little more hesitant until lunch time. Same story of a 2 segment price jump, and same caution now as we should not expect a second day runaway. ES needs to consolidate a bit now.

EURUSD: Yesterday's post: "bears will be coming back and play the Euro down to the pivot level again (~1.416). Euro could also get back to recent lows below 1.41" EURUSD indeed hovered above pivot line until lunch time then reached a low of below 1.408. Easy 40 to 50 pips....
Today, we'll stay on short tick charts. Pivot level is indeed losing significance a little, and we may see a bit of congestion or erratic moves on higher time frames until a clear Fib/MM pattern emerges. The underlying downward pressure (daily chart) could make it drift a little more within the next few days but again, shorter time frames will be needed as we can't discard an up move at first.

Tuesday, September 16, 2008

Quick update after Monday's "bloodshed"

Well, yesterday's "exciting" price action warrants an update on the public blog.

The update published just before lunch time yesterday was clear: prices were at the bottom of a segment, like on a thin string waiting to break. We however can't talk of a free fall, and yesterday's large %change also came from the friday afternoon's recovery wiped out over the weekend.

Anyway, let's look at possible support levels:

ER: 687.5 right now, otherwise down to 656, broken into 2 or 4 segments. Technically, same again to 625. This is quite unlikely though. We have to give this 687.5 level a chance first. A return to 656 would only be another round in cycles (as mentioned in previous posts) we've seen January. So let's just go with the flow again.

ES: levels are not as clearly depicted on our charts, and this may add some confusion for some. We have a support at 1165 which could hold today. There are other possible levels below, but i anticipate markets calming down.

EURUSD: The situation may be a little more confusing because the last upward retracement was a little too sudden to find an equilibrium price etc. Anyway, bears will be coming back and play the Euro down to the pivot level again (~1.416). Euro could also get back to recent lows below 1.41.

Monday, September 15, 2008

Quick Update - Monday 15th

ER: After the initial shock, ER is now staying in the 705-719 segment, yet, while energy is subsiding, there is still substantial downward pressure. We'll have to watch whether 705 holds. The segment below (support around 690) is a safer bet.

ES: Same story, here with a 1219-1250 segment, and also some remaining downward pressure. Not much of a safety below though, so lows have to hold otherwise...

EURUSD: a retracement to above 1.44 was expected, almost awaited, but it certainly came extremely suddenly. There is still some retracement potential but things are likely to calm down first just above pivot level.

Weekly Outlook ES for Sep 15th to 19th '08

Dominant TF: weekly, with 60mins coming back
Swings: UP-DN-DN (from UP-DN-DN)
Market Direction(daily): short or flat

Please also always read ER2 post below for guidance.

Another week of a fall then a recovery, hard to follow on a daily chart, but OK on a 60mins chart or below.
Again we look at the market in clear segments (see last week's posts) to better understand price jumps.
We're now trying to pass the 1250 level again, a level which has lost its significance now, at least until it is again firmly tested as support. This remains to be seen.

60mins: watch pivot level
Again, maybe repeating myself, we have to wait for a confirmation of prices staying above pivot level. MTFS is relatively bullish, even if Entropy seems to be losing steam already. One may want to study shorter time frames, as well as correlation to bonds and forex. We should know within the first few bars of the day if ES stays above 1250 i.e. evolves within the 1250-1281 segment.

Daily: high volatility, but no major change overall...
significance level has dropped for a while at this TF, so the more conservative will have switched to a higher or sometimes lower TF, or stay on the sideline for a while.
Current recovery still looks quite unconvicing, so its potential may be limited at first. Congestion and a clearer testing of the 1250 level would be needed to take prices higher. We'll remain very cautious in the short term.

Weekly: Congestion to lower for now
Summer recovery is over and failure to pass 1300 will force the market to find a reliable support level. The MTFS crossover right now comes with line gradients indicating that support may be lower than 1250, maybe near recent lows. We'll therefore watch shorter time frames carefully until MTFS and Entropy both look healthier.

Saturday, September 13, 2008

Weekly Outlook for ER2 Sep 15th to Sep 19th

Dominant TF: Daily, then Weekly and 60mins
Swings: UP-DN-DN (from DN-DN-DN)
Market Direction(daily): long for some, flat to reenter long for most
Options (RUT): September positions will die gracefully now. For October, no change: call options are placed above 875 for 100% safety otherwise 810 is very safe. I personally think 790 is more than safe enough. Puts below 680 to me are technically safe but could cost too mush if market falls further, so should safely stay below the 625 line.

Last week post tried to show the dynamics of price jumps with possible expectations around salient resistance levels. It's like watching pole vault at the olympics. Again the 750 level proved too high, the good thing being that we realised it immediately monday morning. The mid week update was more that necessary in these times of high short term uncertainty.

EURUSD: The US$ hit our target almost spot on (we have a [1.393-1.391] target range) as mentioned in our daily market report and I also gave indication of the following bounce with a first target to above 1.404 which was then passed. We're probably now on our way to the much awaited Fib retracement (see chart). We have a target now just above Friday's highs (1.4235), or possibly a little higher (just above 1.435). The possibility of a full retracement to ~1.47 is very remote at this stage. Energy is not conducive to thinking this is more than a short term technical retracement at this stage.

60mins: congestion, hesitation
We've seen 705 acting as a strong support to the high end of that price segment around 719, but it is still difficult to say whether it is ready to jump to the higher segment to 735, and 750 looks even more remote. We are therefore more likely to see a congestion period with prices possibly drifting again. Shall we see ER test the pivot level to go higher or go lower, test it as as resistance to then reach lows again...? That's what a pivot level is all about so we'll eventually follow a lower time frame for that purpose.

Daily: much ado about not much
Last week's post expressed how unconvincingly ER was approaching 750, so the rest of the week was almost no surprise. Now despite seeing good looking bounces on 705, it seems drifting could continue, at least to 705 again (also a Fib level) or even around 690 (MM+Fib). Obviously we'll watch the 60mins chart first in case we stay above the 719 line, to me unlikely to hold.

Weekly: very weak upper bias so still same trading range for now...
Again, one could almost just paste last week's post. 750 proved too strong and sellers are now trying to push the market into another cycle it seems. Yet, one should not fall into bearish thinking too quickly. There is a high volatility at the moment, but it is a matter of a little patience until we see energy aligning itself i.e. chaos settling a bit. Again we'll watch lower time frames carefully to determine market direction maybe next week or the week after.
We could indeed still see ER testing range boundary to that difficult breakout to the 780s... or of course, buyers giving up until we hit this year's lows again. Fortunately that scenario still looks less likely to happen.

Thursday, September 11, 2008

ER / ES / EURUSD for Sep 11th '08

You will have noticed the mid week update posted on the public blog yesterday.

Now for today:
ER2: bounce on 705 as expected (see yesterday's post on MarketSnapshot) but we are now in the segment below 719, and we could test 705 again or even 688 later on. We're however not in bear mode and a recovery is still very much possible at the end on this congestion period.

ES: looks pretty bearish right now, but we'll still give July lows a chance to hold. ES should try and stay above 1222,and even pass 1250 again to reassure the markets.

EURUSD: We just reached our target at 1.393, so this is certainly the easiest market of all at the moment. We're looking at a next target at 1.384 then 1.374 eventually. EURUSD is obviously very very oversold right now so we'll tighten our stops just in case.


Wednesday, September 10, 2008

Mid week update

EURUSD: we now see some stabilisation above 1.41 in the short term, but 1.391 to 1.393 remains our target over the next few days. Obviously we have a well defined channel on the 60 mins chart, and prices could test the upper boundary too, without affecting our mid term scenario.

Indices: I warned of high volatility, congestion with a very limited recovery potential. Prices will have to test lows as a support level now on ES. We also do clearly notice that prices jumped to the exact lower segment [1219-1250] with the lower boundary holding for now. Such level is also a Fib target level.
Certainly not out of the woods yet, but we'll keep an eye on this potential support level. ER2 follows the same route with a potential support level around 705.
Conclusion, intraday traders are short, tightening their stops. I would stay flat waiting for a confirmation of recovery over the next few days. If current support level around lows breaks, another strong support level is around 690 so no panic either...

Tuesday, September 09, 2008

Quick Market Update (and Important Info...)

EURUSD: we reacted quick to the change in dynamics mid July, and we've been going with the flow since. Now, it is important not to fall into contrarian tendencies and anticipate a correction every second day. We are as surprised as you are about the relentless of the US$ probably due to unacceptable low levels seen on long times frames. We therefore only give targets as potential support levels to take profits or tighten stops.
The next daily targets is in between 1.381 and 1.383.

ER2: no change in outlook until we finally pass 750
ES: same, i.e. no change in outlook.
We here notice clearly how prices jump from level to level and then evolve in price segments. ES is clearly in the [1250-1281] segment (cf. yesterday's post below).

Nota Bene: Due to budget constraints, this free service is VERY likely to be closed at the end of this month. Please contact me if interested in keeping this Market Snapshot going.

Monday, September 08, 2008

Weekly Outlook on ES for Sep 8th to 12th '08

Dominant TF: 60mins, weekly
Swings: UP-DN-DN (from DN-UP-DN)
Market Direction(daily): flat, re-entering long on shorter time frames

Please also always read ER2 post below for guidance.

Another roller-coaster week yet again which can have been costly to some as one should either trade on the dominant time frame or just hang on until volatility settles now.
You will have noticed that the price segment analysis will have helped with abandonding the 1281 level to try 1250 then 1220 in clear 30 to 31 points gaps. 1281 remains an important level going forward.

60mins: recovery in place
In times of high volatility, following movements on this shorter time frame looks easier at first, but in fact, moving to even lower TFs is recommended keeping this 60mins as the context TF. We'll watch resistance levels (Fib/MM) and where prices now settle. There may be a number of adjustments and arbitrages in the next couple of days (we'll keep a close eye on EURUSD and bonds this week).

Daily: high volatility, but no major change overall...
significance level has dropped for a while at this TF, so the more conservative will have switched to a higher or sometimes lower TF, or stay on the sideline for a while.
We see a recovery to the 1270-1281 area, but we certainly need volatility to subside a bit to determine a clearer direction. ES may therefore congest for a while in this price segment or the one above.

Weekly: Congestion to very limited upper bias for now
Despite last week's volatility, virtually no change in our outlook:
Now that we've seen support holding, we have been looking for a recovery potential, but it appears it will start on a very slow note. Ou MTFS crossover does not point to any convincing recovery. A congestion or limited upper bias remains our favourite scenario for the time being.

Weekly Outlook on ER2 from Sep 8th to 12th '08

Dominant TF: Daily, 60mins with Weekly close behind
Swings: DN-DN-DN (from DN-UP-DN) Weekly direction is hesitant still
Market Direction(daily): long
Options (RUT): September/October call options are placed above 875 for 100% safety otherwise 810 is very safe. I personally think 790 is more than safe enough (strong res at 782) for Sep expiry (less than 10 days).

Last week post indicated a pause, and the mid week update clearly announced the effect of an "air pocket" which is certainly an adequate picture for the turbulences we've seen late in the week. Having said that, looking at our charts, no reason to worry... those things happen and we just have to tighten our seat belts for a while.

EURUSD: we reached our 1.435 target, even a little quicker than anticipated. The $ even hit just below 1.42 but 1.435 is really a strong test level for now. A retracement would certainly make some sense, but in the meantime we'll again go with the flow. The next target is in the 1.367 to 1.383 area still looks some distance away.

60mins: high volatility but fairly clear swings
Ready to pick up again after a sizeable retracement on major 750 level in the form of a quick Fib pattern prices right down to the 700s. Traders should now preferably switch to another set of time frames either lower or higher to take advantage of the current market conditions.

Daily: much ado about not much
We might now see prices hover around the same area and probably pass the 750 level. We have a Fib target around 773 now in sight. Yet, the market may again also calm down on a salient level until the latest news are fully digested and priced in. In all probability, we have 2 price segments: one is [719-750] and [750-782] both being possibly also cut into 2 equal halves. We'll therefore watch price jumps and settlements in such or such area according to energy now coming to the market. At this time i.e. prior to the open on Monday, we have no visibility of a jump above the 750 level just yet.

Weekly: upper bias yet still same trading range for now...
Again, no change (simple copy&paste) from last week.
We're now again testing range boundary to a possible yet difficult breakout to the 780s. Again, we've no or little support from Entropy or MTFS to suggest more than a summer recovery with no underlying strength to take prices higher for now. There's even some 'frustration' not to have seen a clear MTFS pattern completion, but the adaptive indicator may still evolve later on. We therefore have to wait a bit still for a clearer scenario for 4th quarter.
Note: we do have a MTFS crossover to monitor, even if not in ideal situation.

Wednesday, September 03, 2008

Mid-week quick update

ER2: behaving as expected, testing of strong resistance came early after long weekend. Same outlook now with possible congestion/volatility in the upper part of the [734-750] range. Ultimately ER2 will try and hit the resistance again, but we are seeing now a "air pocket" formation hence a stall with prices to a stronger support level. Again, prices generally stay in clear "altitude levels" where an equilibrium is found. In this case, we'll keep in mind that there is a stronger base at the bottom of the [688-734] range. This is however only background info for the time being, which we will review in more details next week.

ES: Same "air pocket" interpretation, with here again a stronger base or support much needed. No worry over the long term but profits can certainly be locked in the meantime.

EURUSD: Now that 1.46484 is broken, we are looking at 1.44043 then 1.43587 as our next targets. Our calculated stall level came only 2 ticks away from yesterday's low! It can still slow down the fall today. Yet, it seems we won't see a significant bounce before we hit our first or 2nd target. Although charts have been very easy to read so far, i am certainly personally amazed by the resilience of the US$, which we can attribute to fall in commodities prices. Net creditors of US debt are smiling again after a period of uncertainty.

Good trading to all and see you on the weekend for the weekly update...