Tuesday, May 06, 2008

Market Snapshot for SPY - May 6th 2008

cf. ER2 post below for guidance.

Market Snapshot for NDX - May 6th 2008

cf. ER2 post below for guidance

Market Outlook ER2 (RUT) for May 6th '08

Dominant TF: weekly chart, then daily. 60mins had to be retuned
Swings: DN-UP-UP (weekly swing still hesitant)
Cycles: average fit, and long cycle detected.
Market Direction: upper bias
Position (60mins): undecisive.
Options (RUT):
Short May780 Calls, Long May790 Calls,
Long May550 Puts, Short May560 Puts

RUT (ER2) has unsurprisingly moved relatively erratically for over a week. It is certainly not a problem for options traders who are cashing in on theta. Directional traders should maybe move to smaller time frames.

We will also follow EURUSD and QM closely.

60mins: directionless
No improvement since last ER2 post, and MTFS is still not giving us the best looking pattern. MTFS points towards some erosion to the low 720s. With significance level dropping, we will favour moving to either shorter intraday frames or stick to the dominant time frames.

Daily: same upper bias, but a retracement or at least some congestion will be necessary.
We are again at range highs (year to date), and MTFS looks overbought with little chance of going higher. A congestion or some moderate retracement is more than likely.

Weekly: congestion, possible retracement
No change since last post:
The worst certainly seems over, and the upper bias is still there, so ER2 has been trying to pass Fib PR1 yet with some difficulty. To be on the safe side though, we will wait for the MTFS pattern to complete shortly (line crossover). Until then we have to consider the remaining downward pressure which will slowly dissipate.
ER2 can also possibly reach the very strong 750 resistance level before retracing/congesting but the most likely scenario for the time being is the same [690-730] trading range. Retracement would be slow and moderate. On the other hand, levels above 750 are quite unlikely over the prediction range (3 to 5 bars).