Monday, February 23, 2009

Weekly Report on ES - Feb 23rd to 27th '09

Oh well, when i said "ES could really sink deep" last week, i somehow didn't quite anticipate we would have such heavy selling, but it was witching day on Friday, thus adding to the high volatility environment.

I added a commented chart on the technical blog, and we still have a strong correlation to our other Russell index (see article below), so we'll just glance at ES peculiarities here.

Inches away from it's 750 target, so immensely anticipated that buyers came back to avoid options being exercised and maybe triggering a more dramatic bloodshed. The following bounce has been here more convincing than for ER, with MTFS looking like it could take prices a little higher. ~780 will be key and we have to be careful as options and futures expiry can certainly spike the market. Longer time frames certainly do not provide any support for optimism just yet...

MTFS here confirms a bounce potential in oversold territory, possibly to a Fib retracement level, on mid 780s or close to 800. Having said that, i wish to reiterate that we have no reason to go long right now, as there is no recovery potential right now.
However 750 is quite strong, and we may just see prices hover for a while in the bottom half of the same range we've had for the last 2 months, i.e. [750-812]

Same as ER, and as mentioned on the commented chart, the picture at this level is just as bearish. Without any change in dynamics and assuming 750 will hold (even if possibly breifly penetrated) the above scenario of prices being restrained in the lower half of our trading range is our best bet. We'll therefore check the key 812 level later on in case of a sudden bounce.

( posted 6 AM UK )

Weekly Report on ER - Feb 23rd to 27th '09

Good call last week with our target just above 400. ER indeed is now sitting on a strong support level on the 60mins chart. Yet, we'll see that this may be a short lived reprieve only.

60 mins:
Sometimes the timing is not ideal to assess what comes next. Indeed ER fell to 406 and almost broke it late in the day to only see a very mild bounce on traders squaring their positions ahead of the weekend.
Technically a bounce to Fib PR1 is possible, but isn't likely at this vantage point. Should selling pressure abate (probable scenario), ER could stay for a while in this [406=437] price segment.

To maybe help us draw an overall picture, ER at this level is very oversold with MTFS indicating a likely bounce (however limited in amplitude) at this level. This could confirm a return to Fib retracement level or even a test of the 437 level by mid week if volatility keeps on playing tricks on us.
However, there is NO change in scenario, and the fall should then resume to the bigger Fib pattern expansion target. We therefore still aim at 380s if the 60mins support level breaks.

Again, the bigger picture here supports the overall scenario here. MTFS and Entropy are still quite bearish. Last bar is just as red as the last five daily bars, so let's just try and see where this whole thing might stop.
We've got a Fib retracement level just above 400, confirming Friday's support level, yet it is difficult to see what could stop ER from testing previous lows. Obviously, we'll watch lower time frames carefully to separate the cup & handle scenarios from its double bottom counterpart, the latter looking more probable.

Note on EURUSD after reactions to my Friday's comments: short term players will certainly have jumped in the bandwagon (i.e. long) to Fib target. Longer term positions are still unchanged. The level 1.2695 is key level now.

( posted 5:30 AM UK )