Thursday, March 06, 2008

Market Snapshot for RUT - Mar 6th 2008

cf. SPY post below

Market Snapshot for NDX - Mar 6th 2008

cf. SPY post below

Market Outlook SPY for Mar 6th '08

Dominant TF: 60mins
Swings: DN-DN-DN
Market Direction: breakout attempt on the down side.

Swing trading on the 60mins chart has certainly been the favorite way to trade for most, particularly those getting bored by the trading range on the daily chart. Being non-directional with a lower bias is still the way to go on higher time frames. We now have to watch whether the trading range will be broken.

60mins: looking for support
As mentioned last time, SPY was a litte exhausted at resistance level. Having said that, we expected a bit of a retracement more than a prompt return to previous lows.
The good thing is that the pattern looks much clearer now. MTFS and Entropy indeed point towards current lows, just below 133, and most problably to MM stall level around 132.
We can note that MM levels have changed though and 131.25 is now a very strong support level, which bears will also try and test.

Daily: back to lower end of trading range.
The big question is: is MTFS current behaviour indicative of a divergence, or will SPY finally recover. The 60mins scenario (dominant time frame) seems to indicate going lower first, and obviously a breakout on the down side is possible.
The current pattern somehow does not quite seem to confirm such bearish scenario, so we'll be cautious and look for a support level soon (cf. 60mins chart). However acceleration on the downside if the current trading range is broken would mean MTFS divergence, and a support level becoming a target around 125. Answer coming soon...

Weekly: bottom?
For the last few weeks, SPY has been hovering around the low to mid 130s, but we could clearly see that it had no energy to pass the first significant Fib level on the up side and both MTFS and Entropy have always remained quite bearish.
As we have said for RUT and NDX, the patterns must now complete and only a drop or a congestion at these low levels can bring MTFS to oversold levels. The key words for the time being are therefore patience and caution...