Monday, December 22, 2008

Weekly Report on ES - Dec 22nd to 26th '08

ES and ER are certainly largely correlated hence it is always worth reading both reports (ER report just below). However information is sometimes clearer on either ES or ER. This time ES can indeed provide some clarification.

ES 60mins: ES bounced twice near 875 which is an important pivot level. Yet dynamics are slowly turning a little bearish so ES could certainly test it again, to possibly bounce again. One should give the downturn more credit and anticipate related effects on ER.

ES Daily: Here as well, indicators seem to show prices hovering relatively high waiting to fall to a support level where buyers would jump in again. Our support levels are 870, 840 and then 810. At this stage, we don't see prices falling that low though.

ES Weekly: Swing is up and Entropy has bottomed yet MTFS is not too bullish so one does not anticipate any significant take off, and after all one has already enjoyed a significant 25% recovery since recent lows, so a pause and some profit taking would be quite in order.

(posted 3AM Eastern)

Weekly Report on ER - Dec 22nd to 26th '08

Dominant TF: 60mins leading, with Daily dropping lately.
Swings: UP-UP-UP from UP-UP-UP (60mins swing is hesitant)
Market Direction(daily): cautiously long or taking profit.

Last week monday, we were long while we anticipated the energy exhaustion ahaead of the 500 level. A fairly easy week overall except we had to remain cautious ahead of triple witching. Now comes the festive season with lower volumes, a bit of position squaring writing off losses by Dec 31st, so we can expect again some volatility ahead.

EURUSD: last week, i really thought €/$ would calm down before marching higher, but we remained positioned long and quite amazed by the $ freefall. EURUSD finally pulled back on 1.47 almost exactly on MM SR level, so again our indicators do react well even if again volatility acts as a time compression. Everything happens a lot quicker these days. At this stage, we should see some slow down possibly around 1.37 (retracement stopped on stall level ~1.38), but the overall direction has now changed, and we shall either see a range shift i.e. same dynamics just shifted upwards due to rate cuts, or a continuation of the fall. We are for the time being waiting to check EURUSD behaviour on salient support/resistance levels before updating our scenario. Our short advice would be to sell the US$ following the 60mins charts as well as tick charts. Upward potential is however limited.
(Image posted)

ER 60mins: surprisingly little difference from last week. ER is still inches away from the 500 target, and finds it difficult to go higher. It is only a matter of time though even if there is still a possibility to see ER consolidating around 470. Here as well shorter time frames are recommended to possibly buy in dips (dominant trend is up).

ER Daily: upper bias weakening here too. Momentum trading should take ER to 500 and even maybe to PR1 around 520, but difficult at this stage to figure out whether we shall then see new energy coming from a breakout effect or another pullback. The latter scenario is preferred, hence caution must be exercised. Those who are still long can tighten their stops, otherwise it is probably too late to enter except on a stop entry above 500 (risky).

ER Weekly: With Entropy bottoming out, we now look at the MTFS pattern and realize that while it does show some recovery potential (+33% from recent lows), there very little chance to see ER going much higher. Logic would say selling would start on key MM or Fib level, as mentioned above on lower time frames. This is a time of uncertainty so buyers should look at buying on an aggressive limit price or wait for a consolidation and buy market later on.

Nothing wrong with staying on the sideline and enjoy a quiet festive season after such an eventful year...

(Posted 2.30 AM Eastern)