Monday, April 14, 2008

Market Snapshot for SPY - Apr 14th 2008

cf. ER2 post below for guidance

Market Snapshot for NDX - Apr 14th 2008

cf. ER2 post below for guidance.

Market Outlook ER2 (RUT) for Apr 14th '08

Dominant TF: 60mins and weekly charts
Swings: DN-DN-DN
Cycles: very good fit but very unreliable (low signal/noise ratio)
Market Direction: down
Position (60mins): short
Options (RUT):
Short Apr760 Calls, Long Apr770 Calls,
Long Apr570 Puts, Short Apr580 Puts
Short May780 Calls, Long May790 Calls,
Long May550 Puts, Short May560 Puts

We have no RUT data, so we swapped for ER2.
We have pointed out how strong the resistance level at the upper boundary of the trading range. We're now halfway down and we'll watch for a possible further deterioration to levels prior to the Fed's bold move. As we said over and over, it will take more time to dissipate the negative prssure.
Options positions are however still looking fine.

On the forex front, despite the current volatility, we'll still keep an eye on EURUSD key level : 1.5625

Interpretation has now to be adjusted a little with ER2 which is a little more volatile. Our last report on RUT was correct in direction, but admittedly did not fully anticipate the snowballing effect we've seen.
We here see levels moved downward with a strong support level back to 688, and at a same time the overall range being reduced. At first sight, 688 looks pretty strong, but MTFS is still quite bearish, so we'll also consider the next support level at 670. Entropy is still average, which surprisingly is more indicative of erosion than an actual downward pressure. This would confirm a continuation of current situation.

Daily: looking for support
Not surprisingly, Fib levels are about the same as on the 60mins chart, and 670 looks a plausible target. The weakening of the MTFS is not incompatible with this scenario.
At this point in time, there is no indication that March lows would be hit again.

Weekly: congestion to down bias
I repeatedly said that we have to wait for the MTFS pattern to complete, and until then the downward pressure is dissipated, the current negative bias will prevail. ER2 (RUT) should consolidate at this low level and a line crossover may occur soon. We'll see how a new pattern then develops. In the very worst case scenario, the 625 support level would be hit, but would certainly hold.