Sunday, May 18, 2008

Market Snapshot for NDX - May 19th 2008

cf. ER2 post below for guidance.

Market Snapshot for SPY - May 19th 2008

cf. ER2 post below for guidance.

Market Outlook ER2 (RUT) for May 19th '08

Dominant TF: all 3 !
Swings: UP-UP-UP (60mins swing unstable)
Cycles: unreliable
Market Direction: minor upper bias.
Position (60mins): flat, some would stay long, or move to lower time frames.
Options (RUT):
Short Jun790 Calls, Long Jun800 Calls, Long Jun610 Puts, Short Jun620 Puts.

I warned last time about short term volatility and
indeed the 60mins chart has proved to be a little erratic, even if the trading range has been constrained. Options have expired with a profit without adjusting a single ime. While we think June positions are safe, some may want to shift calls up a little.

Note: apologies for the typing mistakes on last ER2 post.

60mins: congestion to upper bias
No major difference from last post: ER2 should remain a little volatile even if May options are now history. We may again have another round or congestion or finally aim higher at 750. Stall level in high 740s has so far stopped ER2 from testing the major 750 resistance level, and while there is little energy in the market right now 734 has proved to be a strong support level.
Portfolio adjustments or economic news may finally make the market test 750.

Daily: congestion to minor upper bias
750 looks so close yet also looks so predictable that there could be significant program selling on or close to that level. There is some energy left in the market, therefore the resistance level is bound to be hit this week. We however do not have
the most bullish situation showing in MTFS so only ER2's behaviour on 750 can tell us how the pattern develops. For now it seems the resistance level will hold.

Weekly: congestion, possible retracement
While the upper bias is now obivous, the market is looking at pausing soon not only to better complete the MTFS pattern but to consolidate to eventually go higher later on. We will therefore keep a close eye on MM/Fib levels particularly the combination of the two in the lower 750s. Like in lower time frames, the MTFS pattern and the Entropy do not point for a return to the bullish trend yet, so again, it is likely that a retracement or consolidation will be necessary.
We'll keep into consideration that this is a crucial phase as the pattern can reverse and on the contrary turn back to bearishness, test of last lows etc. We'll obviously have to first wait for the next pivot point and then the subsequent support level, and this can take up to a couple of months. We'll have plenty of time to come back to this in future posts.