Wednesday, May 28, 2008

Market Snapshot for SPY - May 28th 2008

cf. ER2 post below for guidance.

Market Snapshot for NDX - May 28th 2008

cf. ER2 post below for guidance.

Market Outlook ER2 (RUT) for May 28th '08

Dominant TF: all 3
Swings: UP-UP-UP
Cycles: frequency detected, but poor fit
Market Direction: congestion to upper bias.
Position (60mins): long to flat
Options (RUT): no change
Short Jun790 Calls, Long Jun800 Calls, Long Jun610 Puts, Short Jun620 Puts.

The upward retracement mentioned yesterday was actually a little stronger than anticipated, possibly on account of the long weekend.
About ER2, we also gave the 719 support level on last post. We're now back to pivot level... what next?

60mins: upper bias
MTFS gives some minor upper bias, however we have no clear recovery pattern. Entropy is also quite weak. Some upward momentum is defintely there after a strong day like yesterday, so ER2 may try and crawl back to latest highs. One doesn't however see how ER2 will get there without new energy (exogenous factor like a positive economic news or rising US$)

Daily: congestion, up trend still valid.
Weakening Entropy and undecisive MTFS point towards some congestion. ER2 will probably have a go at 750 again soon, but like on the 60mins chart ER2 is unlikely to pass that test level without some positive exogenous force driving it.
The picture may get clearer later this week. In the meantime, theta is on the side of condor traders.

Weekly: congestion, possible retracement
Again, no change from last post:
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.