Wednesday, October 08, 2008

"The end of the world as we know it..."

Again volatility is playing tricks and it is difficult to pinpoint market celerity accurately, or i have maybe neglected that part of analysis until now. I said yesterday that the €/$ would stay above 1.355 and that we should play ER and ES from the top of the intraday wave down and down... That's exactly what happened.

Now, the markets are now in dire straits and we can only hope the next support level, our short target for now, will hold for the sake of keeping the financial world in one piece... Long term consequences will be dramatic for the western world to say the least. I might come back to a more "philosophical" analysis when this spurt of market chaos is finally over. Now for today:

EURUSD: Downward pressure with still some resilience from the Euro which will try and stay above current support line. A breakout is always possible but unlikely. Arbitrage may happen against other pairs... if players now dump both currencies together...
Technically EURUSD is still looking for support in the 1.354 - 1.367 area and this explains the uncertainty in this range.

ER: Heading straight for 531. We've discussed price segments in many previous posts and we all know markets move in fairly well defined discrete steps. Our problem is the energy carried in the movement. Again, this situation will take a LOOOOONG time to heal.
if 531 doesn't hold, the market will try a round number, i.e. 500, but we can't discard a final bottom to be found in that area. Time-wise, it is very difficult to say when this could happen, but wouldn't be surprised if that is before the end of this week.

ES: Hard to believe it would sink much further. The market will try and get to stops below 1000. Again we'll watch steps of 31 points... with an eventual target in the 925-940 area ! (with a possible pause half-way in the 960s)
I wouldn't dare predicting when such target will be hit though...

(today's screenshots available on request)

PRE-MARKET UPDATE: we've had a bounce on ES at 963 i.e. a few points below the 1st "31-point segment" at 968.