Thursday, November 27, 2008

How do I read charts ?

No report today. The market behaved as expected yesterday with a bit of shopping spree, maybe indicating the worst is definitely over. We will review that in detail in the weekly report.

Today, I decided to instead just post a commented ES chart for those a little more interested in the technique itself.

Enjoy the long weekend,

Wednesday, November 26, 2008

I can smell the turkey baking already...

A quick note to readers and users of this TS-TT:
Please tell me about your trading, how you use this report, how successful you are with it. Most non-users take it as context information and make money filtering their own trades with it. Obviously, it is only a daily snapshot, and it is not as good as seeing it live. The reason for this question is that this technology will eventually be sold during the course of 2009, and only users who have expressed interest stand a chance to be listed as exceptions to the license's exclusive rights. Anyway, we still have a few months ahead of us.

Let's have a look at our charts:

EURUSD: The pause announced on 1.295 resistance level lasted about half a day after which € charged in to test a stall level at 1.306. Next resistance level is 1.318, but energy is now lacking a bit. As mentioned on the weekly report, there is now a definite change in mindset and the $ will certainly weaken (is deleveraging coming to an end...?). For the time being €/$ stays in a channel (60mins) and should eventually reach 1.306 and then 1.330. Lack of energy and volatility make it however difficult to detect retracement points along the way.

ER: The resistance level mentioned yesterday is still there, and despite some minor profit taking, ER has proven quite resilient. Here again, energy starts lacking so there is a good chance of erosion. Maybe a good chance to try and enter long on aggressive limit orders. With a bit of luck, one can maybe enter long below 420 within a day or two.

ES: Again, very similar situation. ES found enough impetus to go test the 875 resistance level (yesterday's high of 874 to be exact). Here too, the change in mindset is obvious, but we can also try and enter agressively as we have a typical "failed recovery" pattern on the Daily chart, so a retracement is almost already written. ES may possibly hover high still, but it should eventually retrace to the high 810s, low 820s before breaking the channel and travel to 1000. Obviously, we'll also play the channel breakout if the retracement proves too contained.

Tuesday, November 25, 2008

Crystal ball

Again, it is interesting to see how accurate a scenario can be with however that same caveat of volatility acting as a time compressor. Oh well, it is a daily report, so users of our technique will obviously adapt to lower time frames, and others can always contact me for custom market analysis.

EURUSD: We saw that bounce to 1.27, which broke easily, so we stayed long to the next very clear resistance level at ~1.295. It is a resistance level which could break later on even if a pause is likely today. We'll provide new targets tomorrow.

ER: A similar story in a way as i announced the 440 target without fully anticipating it could be hit the same day. We do have an upper bias in the short term but profit taking is likely. The high 430s area is a substantial resistance for now, and even if we go higher over the next few days i.e. ahead of the long weekend. A retracement is more than likely so long term players do not have to rush into the market just yet.

ES: Very similar situation with a resistance level around 850. ES is short term overbought so should pause on its way to 875. Again, this is short term play, and not a motivation to buy frantically just yet. ES will retrace to the 810 area at some point.

(posted ~1AM Eastern)

Monday, November 24, 2008

Weekly Report on ES - Nov 24th to 28th '08

Last week monday, the title on the daily comment was "not looking good" and the weekly was on a similar tone. Now that we've hit our target, we're back to our drawing board trying to make some sense out of our charts. Markets being largely correlated, so please also read the ER report below.

ES 60mins: bouncing on key support level
Same dynamics as for ER, ES is aiming back at MM/Fib level around 812. The swing gradient follows the amazing recovery on Friday and is obviously unstable. So ES could hit the target, then retrace back a support around 781 to 784. We'll have to confirm that scenario tomorrow. Should volatility play tricks again, 812 could be passed then tested for support later. I doubt this could happen within a day though ( a lower intraday time frame is needed here )

Daily: hmmm not looking great still
This is where we certainly have to remain cautious. Our indicators are still bearish even if immensely oversold. Secondly, the 750 level appears a little weaker, so while we are moving away from danger zone, we're certainly not out of the woods yet.
We'll wait for a blue bar, a channel breakout and MM/Fib levels to go long at this time frame. For the time being, we remain short with tighter stops or flat.

Weekly: inches away from Fib target.
Here as well, one should certainly aim at a quick turnaroung and start buying frantically already. The situation is similar to the daily chart i.e. bearish and at the same time very oversold. Volatility may push players to test 710 and then only call for the end of the game. As we've seen in other markets, we do have some indications of a pending turnaround, which i call a change in mindset, but it is in no way confirmed on our charts yet.

- Today's chart snapshot is commented.
- Like for ER, daily updates will be posted on this blog this week again.

(posted 1:20 AM Eastern)

Weekly Report on ER - Nov 24th to 28th '08

Dominant TF: Daily, 60mins with the weekly chart naturally a little behind in this volatile environment.
Swings: UP-DN-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): a Dec put spread is quite possible.

Last week monday, the scenario for the week was pretty clear, and we anticipated the fall quite well. But now that the purge is done and targets have been hit, what next ?

EURUSD: The daily reports last week have been pretty accurate, anticipating a drift to range lows around 1.245. We now have a recovery attempt and 1.27 is our immediate target. Our weekly chart also confirms the likelyhood of a bottom, but we'll wait for all time frames to agree on a turnaround. At this juncture, the € could strengthen only very slowly, and even stay subject to short term volatility. In a way, it may be a change in mindset rather than a definite signal just yet.

ER 60mins: bouncing on 375
ER is climbing back ground lost last week with hurdles mid way (32points segments again) and ultimately having to face a serious test level at ~440. In the short term, a bounce is more than likely as 380 is a STRONG suppport level, but we don't see any freedom to go high quickly as we have an enormous downward pressure to dissipate first. Aggressive short term players chould however have taken a chance and be long already with a stop below the 375 support level. We may also wait for a confirmation in higher time frames. One could say that a bottom scenario is likely, but is not yet as clear as for EURUSD.

ER Daily: still bearish technically
One may be in a hurry to get back into buying but this time frame should nonetheless help keep our cool. There is no rush to go long unless if one really wants to try and pick a bottom. All pointers are still down, so one may want to wait for an entry point later one this week.

ER Weekly: bottom ?
Last week, i mentioned that TRUE support would be 380. It sounded almost impossible and yet nothing surprises anymore with these markets. Now we've hit it and while we would like to see it as the ultimate bottom (and it could well be!), we have a LOT of negative pressure to dissipate, and we've all seen how much volatility those turbulences of energy have caused. Again, we must prepare for a potential change in mindset, but we should NOT rush into buying as our chart DOES NOT show any indication of a recovery in the short term.


(posted Monday 0:01 AM Eastern)

Friday, November 21, 2008


Oh well, yes, i was right. I announced that purge and short sellers are happy today but i won't boast or rejoice in sympathy for millions who are depressed by these markets. To those i just have to say that the bottom is now around the corner. Markets have now reached the levels they were supposed to reach.

EURUSD: Hit the lower boundary of its short term range at ~1.245 where it could try and bounce a little. EURUSD is oversold but not yet ready to turn around. Over the medium term, one cannot discard a target around 1.23 (stall), or even 1.22 (strong support)

ER: There we are. We've hit 380, so we can now rest for a while. Volatility could exarcebate profit taking or some short squeeze, but more realistically, ER should stay low to dissipate the massive negative energy built in the market. Over the medium term, 437 is key level.

ES: Same story. We're now on 750 which is quite a strong support level. Here also a bounce is possible if not likely (tgt: ~781), and here also bear pressure is enormous. Short sellers may want to take profits and/or tighten stops.

Over the longer term, we still have a possible ES target around 710, but 750 could still hold so we'll remain quite careful here. The purge is not technically over and volatility can play more tricks. At this juncture, one can take profits and wait for a clearer picture, otherwise short intraday time frames are recommended.

(posted 00.30 AM Eastern)

Thursday, November 20, 2008

Going with the flow...

What did I say yesterday in conclusion of the daily report? Yes, i used the word "purge" on purpose, and there was indeed an easy lucrative short. It may be painful for some but we need to go through it to rebound. Most institutionals have given up on 2008 and are preparing for a better looking 2009 but at the same time, we may have a patch of blue sky before 2008 comes to a close.

EURUSD: A very modest bounce is possible today but the overall trend remains down to a ~1.245 pivot level. Mid term, we however have to notice a likely bottom somewhere between stall level (~1.22) and ~1.245. This is no excuse to go long, but only to take shorts a little more cautiously.

ER: Markets are somewhat correlated and even a bounce on EURUSD may have an impact on ER. However the the trend here remains down until a new support is found. Such support could be near current lows, but is more probably around 390. What's another 20 point drop these days anyway...

ES: yesterday's fall stopped on a strong short term support around 812, but the downward pressure is still strong so we could be heading towards 750.

The purge is not over, yet it does not mean markets will lose 4 or 5% every day until we eventually hit the final bottom (I mentioned a possible ~710 target for ES in previous reports). Again, we'll remain cautiously bearish again today, and as usual, go with the flow...

(posted 11.30 PM Eastern)

Wednesday, November 19, 2008

Something's brewing here...

A bit of action and some good fun for intraday players yesterday. It seems these low levels are fiercely fought, yet no change in our market outlook...

EURUSD: 1.27 is now a STRONG resistance level but shows weaker energy levels. Our preferred scenario is the continuation of current drifting with steps on 1.257 then [1.251-1.253]. Obviously, in absence of intrinsic energy, EURUSD will be more sensitive to exogenous factors.

ER: Here also, lower highs and lower lows should normally indicate lower support levels. However, the stunning recovery on day close proves that 437 is still going strong. We will check for a channel breakout to change our mind. Until then same drifting, i.e. cautiously short.

ES: Fib/ MM target levels concurrently on 828 have been tested successfully, but there is still no underlying conviction the market is ready to turn around just yet. Here too, we'll check for a channel breakout on the daily chart.

NOTE: We may see a final purge coming these next few days. Our ES target is 812, or even 772 ! (lower time frames recommended)

Tuesday, November 18, 2008

Just another Prozac day...

In this all gloom & doom, the good thing is that markets are relatively easy to read. We'll refer to yesterday's weekly report.

EURUSD: Clear swings. €/$ is aiming at range lows again, more like a continued drifting situation until a strong support is tested. Technically such support should not be too far, so market participants are now a little hesitant.

ER: Should aim at lows again (~440) or lower. That support level is very strong yet there is a potential to break it to finally purge the market right down to 380. Too early to say though.
Energy is low on the 60mins chart, so we may see the eye of the storm today.

ES: Same situation with a possible return to 830. Low short term energy here too, with the same possible scenario of a purge to the low 700s in the longer term.

(Posted 0.01 AM Eastern)

Monday, November 17, 2008

Weekly Report on ES - Nov 17th to 21st '08

Last week, i recommended remaining very cautious about turning bullish too quickly and it proved certainly wise didn't it? 1000 is now remote and just like ER, we're now back to lows. ES hit a first Fib target (~820) and staged a modest bounce but bars remained red all the way...

NB: The ER report is more detailed. Please refer to it as markets are largely correlated.

ES 60mins: aiming at lows again
ES follows the same general market direction (c.f. ER below) and could aim back to lows with a target sitting on a Fib/MM level : 827.
However we have some indicator divergence on our adaptive MTFS so we'll wait for a bar or two after the open to review the scenario here too. We cannot exclude the 875 key level being tested again as resistance now.

Daily: not looking good
Same as for ER, we have all indicators pointing down. We will however notice that since the Fib/MM target has already been hit on friday we may see a retracement to the 855 area (Fib PR2) to possible bounce back. In such case, like on the 60mins chart, we would need to pass 875 clearly to pave the way to 1000 again. We have yet NO such indication right now.

Weekly: desperately low...
MTFS is so oversold and entropy is so low that we all know a recovery is bound to happen but this is not at this time frame that we'll time it properly. We will however watch Entropy bottoming up to signal it. We might be just a few bars away, so we'll certainly keep our finger on the pulse...

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

Weekly Report on ER - Nov 17th to 21st '08

Dominant TF: Daily. Gradient is too high on the 60mins chart.
Swings: DN-DN-DN from UP-UP-DN (where's my Prozac ??)
Market Direction(daily): bearish

Last week monday, we were right on the 500 level waiting for it tested, passed and confirmed. It again failed and dropped 2 price segments (32 points wide, so we got our target right around 440, then am amazing bounce to only fail again short of our key 500 level. In a way the good thing is that moves are relatively clear again, yet we see longer time frames taking the lead hence we shall carefully take signals in the dominant trend i.e. short, and volatility tells us to pay a lot more attention to shorter time frames. So, being short in a bear market does not stop us from being cautious.

So, let's have a look at our charts, starting with EURUSD:

EURUSD: The 1.27 level broke to expand the range to [ 1.245 - 1.29 ]. Volatility picked up on Friday again with a down move which stopped on stall level just above 1.25. We could see a minor bounce, but EURUSD should generally stay in the lower part of the range i.e. below 1.27 and even aim back at the support line. In the medium term, we still target previous lows or even 1.22 as mentioned in previous reports.

ER 60mins: looking for support
Volatility is again quite high as it looks like buyers have given up on the 500 level for now. We now have to see whether a support level can be found in the 440 area or lower. There is some good chance of a slow-down and the 437.5 is quite a strong support level. We have lower targets also, but we'll have to wait one hour in the trading day to update our scenario at this time frame.

ER Daily: not looking good...
Obviously, like on the 60mins time frame, we're looking at a bottom in the 440 area or ... lower... All indicators are still pointing decisively down, so we we could see ER drop further in 32 points segments. At the back of our mind we still have a target in the 380 area. Should 440 hold we have far too much negative pressure remaining that while we could have a bounce, ER should remain range bound for a while. We indeed have a [~440 - ~560] range with a key pivot level, i.e. 2x32 points below and above that key level.

ER Weekly: is there light at the end of the tunnel?
Yes there is, but we probably have to wait a little longer still. Like on the daily chart, all indicators are bearish and we can only (faintly) hope these recent lows will hold. At this time frame, the target level is rather around 380 and we may see buyers momentarily give up to gather forces at that level.


Friday, November 14, 2008

Oops... wrong button...

I don't what some top traders at big financial institutions had for lunch yesterday, but they certainly had some appetite left in the early afternoon !! Some massive program buying was indeed triggered on key levels. We indeed saw yesterday some substantial selling in the morning as anticipated and key levels hit on major indices. On ES thet key level was close to previous lows, and as said before would open the way to a sell-off to the low 700s. That scenario is temporarily rejected.
Again, it would take quite a few more days like yesterday to see sunny skies again.
This short term recovery may stop the hemorrhage for now, but we shall remain a little cautious at our time frames.
Today again, shorter time frames (<30mins) will be recommended.

EURUSD: A bounce on 1.245 came back to the level as a springboard to trigger the afternoon rally very close to the stall target level at 1.87. Short term trader should now take some profits, and try and test the 1.269 pivot level for support. Long term trend hasn't changed yet, but some upper bias remains for this end of the week.

ER: ER hit a rock solid 437 support level then went on a nice afternoon rally, probably exacerbated by some short squeezing. Bears have to learn to give back sometimes... This retracement has a target level around day close (~489) but could well test 500 again on momentum trading. Indicators are actually short term bullish even if there is no change yet on the daily chart. We'll wait at least a few more days to confirm a double bottom. We recommend staying quite cautious.

ES: Exact same scenario except maybe the stall level was deeply penetrated and buying actually occured inches before the strong level around 813. Market correlations and program trading do explain the slight discrepancy to calculated level and confirm that ES is not a 'driver' at the moment. Today, we can see momentum fading a little on Fib target but one could maybe still see more buying to 920. A pullback to [875-880] levels (Fib,MM) is however more likely to test how solid is this short term recovery.

Thursday, November 13, 2008

Ice Age

Some will start finding these markets a little depressing, yet sailors also don't often suntan on the deck either and have to go through rough seas now and then. Some traders/investors paid too much attention to their skin and can't take the pressure now.

Anyway, yesterday was again a little more abrupt than anticipated but we hade seen a lot of buyers giving up (500 tested as resistance on ER for instance) so a support level breaking induces a lot of selling searching for the next level.

Today, on EURUSD a substantial level has been hit around 1.245 even if the underlying trend is still there. Maybe a pause or a bounce today or tomorrow, but now aiming at 1.22 as mentioned in previous posts.

ER: Negative sentiment has to take ER to 437 close to recent lows, which will be the recent test. This revives a scenario of mine in recent weeks of an absolute bottom around 380.

ES: Again, same story here with a first target around 828 very close to recent lows at 827 and a Fib target at 821. Here again looms that same bearish scenario of an absolute bottom around 710...

At least, in this period of climate change, some bear species are still thriving...

Wednesday, November 12, 2008

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...

Tuesday, November 11, 2008

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.

Monday, November 10, 2008

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.


Friday, November 07, 2008


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...

Thursday, November 06, 2008

"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 ...

Wednesday, November 05, 2008

"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.

Tuesday, November 04, 2008

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)

Monday, November 03, 2008

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.