Monday, September 08, 2008

Weekly Outlook on ES for Sep 8th to 12th '08

Dominant TF: 60mins, weekly
Swings: UP-DN-DN (from DN-UP-DN)
Market Direction(daily): flat, re-entering long on shorter time frames

Please also always read ER2 post below for guidance.

Another roller-coaster week yet again which can have been costly to some as one should either trade on the dominant time frame or just hang on until volatility settles now.
You will have noticed that the price segment analysis will have helped with abandonding the 1281 level to try 1250 then 1220 in clear 30 to 31 points gaps. 1281 remains an important level going forward.

60mins: recovery in place
In times of high volatility, following movements on this shorter time frame looks easier at first, but in fact, moving to even lower TFs is recommended keeping this 60mins as the context TF. We'll watch resistance levels (Fib/MM) and where prices now settle. There may be a number of adjustments and arbitrages in the next couple of days (we'll keep a close eye on EURUSD and bonds this week).

Daily: high volatility, but no major change overall...
significance level has dropped for a while at this TF, so the more conservative will have switched to a higher or sometimes lower TF, or stay on the sideline for a while.
We see a recovery to the 1270-1281 area, but we certainly need volatility to subside a bit to determine a clearer direction. ES may therefore congest for a while in this price segment or the one above.

Weekly: Congestion to very limited upper bias for now
Despite last week's volatility, virtually no change in our outlook:
Now that we've seen support holding, we have been looking for a recovery potential, but it appears it will start on a very slow note. Ou MTFS crossover does not point to any convincing recovery. A congestion or limited upper bias remains our favourite scenario for the time being.

Weekly Outlook on ER2 from Sep 8th to 12th '08

Dominant TF: Daily, 60mins with Weekly close behind
Swings: DN-DN-DN (from DN-UP-DN) Weekly direction is hesitant still
Market Direction(daily): long
Options (RUT): September/October call options are placed above 875 for 100% safety otherwise 810 is very safe. I personally think 790 is more than safe enough (strong res at 782) for Sep expiry (less than 10 days).

Last week post indicated a pause, and the mid week update clearly announced the effect of an "air pocket" which is certainly an adequate picture for the turbulences we've seen late in the week. Having said that, looking at our charts, no reason to worry... those things happen and we just have to tighten our seat belts for a while.

EURUSD: we reached our 1.435 target, even a little quicker than anticipated. The $ even hit just below 1.42 but 1.435 is really a strong test level for now. A retracement would certainly make some sense, but in the meantime we'll again go with the flow. The next target is in the 1.367 to 1.383 area still looks some distance away.

60mins: high volatility but fairly clear swings
Ready to pick up again after a sizeable retracement on major 750 level in the form of a quick Fib pattern prices right down to the 700s. Traders should now preferably switch to another set of time frames either lower or higher to take advantage of the current market conditions.

Daily: much ado about not much
We might now see prices hover around the same area and probably pass the 750 level. We have a Fib target around 773 now in sight. Yet, the market may again also calm down on a salient level until the latest news are fully digested and priced in. In all probability, we have 2 price segments: one is [719-750] and [750-782] both being possibly also cut into 2 equal halves. We'll therefore watch price jumps and settlements in such or such area according to energy now coming to the market. At this time i.e. prior to the open on Monday, we have no visibility of a jump above the 750 level just yet.

Weekly: upper bias yet still same trading range for now...
Again, no change (simple copy&paste) from last week.
We're now again testing range boundary to a possible yet difficult breakout to the 780s. Again, we've no or little support from Entropy or MTFS to suggest more than a summer recovery with no underlying strength to take prices higher for now. There's even some 'frustration' not to have seen a clear MTFS pattern completion, but the adaptive indicator may still evolve later on. We therefore have to wait a bit still for a clearer scenario for 4th quarter.
Note: we do have a MTFS crossover to monitor, even if not in ideal situation.