Friday, October 24, 2008

Let's tighten our seatbelts... but shall we soon hear the "Brace" command now...?

Crazy volatility... Daily reports prioir to this crisis used to be good enough as the techniques generally gives a market outlook about 3 to 5 bars ahead. Nowadays, one would need at least 1 or 2 intraday updates to keep up with this market chaotic behaviour.

So yesterday, we played the bounce to around 920 on ES in the first hour of regular session or so, but the recovery failed to look for support back on the 875 level. More worrying maybe is that 875 level being penetrated to below 860. Today we'll watch that level very carefully again as we may just see buyers giving up the battle...

EURUSD: as mentioned yesterday, despite being on a target level, there is indication of the US$ strengthening for technical reasons (deleveraging). Next target is just below 1.27 and will be hit sooner or later.

ER: i said yesterday that ER should stay in low levels... and we'll have the same scenario today with renewed selling to recent low just under 470. Will it hold there? Difficult to say, but we can enter another price segment and forget the "500" battle. The target would then... 453! Extreme volatility can make support/resistance levels being penetrated deep without breaking thus creating more volatility. To avoid breaking (and another free fall) we now have to release some energy and get back to the 500 area very soon, otherwise 453, here we come...

ES: As said above, we had the anticipated bounce and then down and up... and down again. If a support is not found just below 870, we could see ES fall to below 840!

Conclusion: Let's forget any recovery potential for now. The 1000 battle on ES is now a stuggle to stay above 875. And more hardship to expect if these low levels do not hold today... Again, i recommend long term investors to stay out of it, or cash in on volatility with WOTM options (WAY Out of The Money). Trading short intraday time frames is still possible if not easy (10mins max).