Sunday, July 20, 2008

Weeky Outlook on ES 21st to 25th July '08

Dominant TF: All three, with 60mins still a little behind
Swings: UP-UP-DN (from DN-DN-DN)
Market Direction(daily): going long

Please read the ER2 post also. Both symbols are undoubtedly correlated yet each has its specificities.

60mins: 1250 seems to hold yet...
We indeed saw the channel breakout as mentioned on the last weekly post, to see prices settle a little higher. Indeed lower intraday time frames showed clearer pattern and possible Fib target up to 1270. Swing is now UP and MTFS isn't looking too shabby with a pattern indicating some exhaustion in the short term but clearly some steam left in the green line. This is typical of a stall but can generally take prices higher. This stall is also visible in Entropy weakening fast. ES should therefore remain contained in a fairly narrow trading range.
More interesting maybe is how MM levels have evolved. 1250 is now clearly a pivot level, and despite the overall up move in the last week or so, SS is now significantly lower.
We shall therefore again take cues from lower time frames to check ES behaviour around pivot level as we might see some retracement at the end of the current congestion period.

Daily: Up bias
We already had an early MTFS crossover last week, so we anticipated a bottom, and even a bounce on Fib/MM support levels. We now have a more positive outlook with ablue bar, lines sloping upward, bottoming out entropy etc so ES should certainly be looking at going up possibly to Fib PR1 (38.2%). Now the only caveat is again the early crossover so one could either be long with a stop below 1230 or maybe try to find a better entry point anticipating a pullback still. Looking at the overall picture, i would tend to opt for the second scenario.

Weekly: Caution must be exercised.
Again we see that Fib target level here similar to the one on the 60mins chart. We last week mentioned a bit of fighting on those levels and despite a possible 1100 Fib target, a quick look at our symbols seemed to provide enough reassurance that current bottom would hold.
A week later, one can say that this scenario looks valid bt we're not out of the woodds just yet. We will remain cautious and above all refrain from turning bullish already. The Fib pattern is still there and MTFS still looks quite bearish. We will wait for at least a yellow bar above 1250 to confirm the fall is over. This means that despite positive signals in shorter time frames, there is still no strong recovery potential at this stage.

Weeky Outlook on ER2 21st to 25th July '08

Dominant TF: All three, shorter time frames leading
Swings: DN-UP-DN (from DN-DN-DN)
Market Direction(daily): flat to long
Options (RUT): no change in outlook for August, i.e. condor outside the 625-750 range.

On ER2, last weekly post indicated exiting shorts but not going long just yet (following our time frames and market outlook). We indeed saw a bottom being confirmed and even some attempt to go higher. Looking at intraday time frames, some would understandably have gone long last week.
All in all, last post again didn't do too badly. What next now?

EURUSD: There will only be a chance of significant recovery if the US$ passes 1.5625, so fairly weak and directionless still. We'll obviously also keep an eye on oil prices and further consequences of the subprimes blunder.

60mins: no upward momentum but...
We indeed saw ER2 passing the MM pivot level briefly to hit a Fib target but there was not energy to carry prices much higher. Hitting 700 was even a bit of a stretch.
MTFS is pointing for a mild erosion and MM level turned to Strong Resistance.
There is still a vague chance that SR holds as support but this is unlikely. One would rather anticipate ER2 to find some support on a lower Fib retracement level. There is however no indication of a reversal (we don't even have a single red bar) so prices shall not reach recent lows again.

Daily: trying to move upward
Despite the early MTFS line crossover, we now have a positive outlook on ER2 with lines pointing upward. Entropy is also looking healthier now. One might have entered long last week from lower time frames (i however purposely only give a market outlook and no trading signals per se). Stops would be tightened now.

Weekly: congestion to a little bearish
For the 2rd time now, MM stall level seems to have broken the fall, and one might think that a reversal is in the cards. Yet, MTFS and Entropy look if not bearish at least congestive so one should certainly not expect a strong rebound before the negative pressure is dissipated. Furthermore, as all 3 time frames weigh equally now, the latest bounce may only be a reprieve and the Fib target around 625 can still be hit within a few weeks and without any significant exogenous shock to the market. One shall therefore remain fairly cautious as one should always be when Swings are in a DN-UP-DN configuration.