cf. SPY post below. RUT is highly correlated, so one shall here mainly look at specific MM/Fib levels.
Tuesday, March 11, 2008
Market Snapshot for RUT - Mar 11th 2008
Market Snapshot for NDX - Mar 11th 2008
cf. SPY post below (correlated charts). Since direction is clear, we will watch Fib/MM levels carefully.
Market Outlook SPY for Mar 11th '08
Dominant TF: 60mins, but weekly chart picking up fast.
Swings: DN-DN-DN
Market Direction: down, down, down... yet a support level remains a support level until it is broken. Let's avoid reading too much "gloom & doom" into current charts, and just analyse what charts really tell us and nothing more.
We observed the breakout announced 3 trading days ago on the 60mins chart, and we are since looking for a support level... Nothing can really stop SPY before the 125 level now.
60mins: again looking for support
SPY has almost gone straight down for over a week, so this is the ideal situation for a stall level (reminder; it is half way between the current "white dots" mild support and the the strong MM support at 125). The stall level this time is also close to January lows.
MTFS remains very bearish and could develop a divergence. No positive indication from Entropy either. Now since we saw the MM levels coming down 2 days ago, we have to aim for 126.40 then 125, but we can't really read more into the current chart.
Basically, no recovery in sight, and wait for a pattern to maybe develop on next support level.
NB: we left the cycle indicator on, just to show how erratic cycles can be. At this point in time, the noise level is too high to trust them. It goes without saying that this applies to any cycle detection indicator you may have acquired from popular vendors...
Daily: bearish
MTFS has shown the typical "failed recovery" pattern for a few days. In such situation, SPY can only return to previous lows... or lower. Entropy looks quite bearish, but we will give 125 a chance still. Without being overly optimistic, one can never discard 125 holding.
Weekly: bottom?
For the last few weeks, SPY has been hovering around the low to mid 130s, but we could clearly see that it had no energy to pass the first significant Fib level on the up side and both MTFS and Entropy have always remained quite bearish.
As we have said for RUT and NDX, the patterns must now complete and only a drop or a congestion at these low levels can bring MTFS to oversold levels to see a new pattern then emerging. The key words for the time being are therefore a lot of patience and again and again some caution...
Monday, March 10, 2008
Market Outlook RUT for Mar 10th '08
Dominant TF: 60mins and weekly charts
Swings: DN-DN-DN
Cycles: not quite reliable (good turning points but low signal-to-noise ratio)
Market Direction: down, but support may and even should hold
Position (60mins): some could take profits here.
Options: March iron condor (1.5 week left). April in place:
Short Mar790 Calls, Long Mar800 Calls, Long Mar600 Puts, Short Mar610 Puts
Short Apr760 Calls, Long Apr770 Calls,
Long Apr570 Puts, Short Apr580 Puts
(again one could also be negative delta)
We saw MM resistance levels capping any possible recovery, then support level dropping on Thursday, so RUT was irremediably attracted to the strong support level at 656. Sometimes, markets are indeed very predictable.
We will have to analyse the 3 correlated markets carefully to better assess support levels.
Now, my 2 cents to those who keep asking me "is it time to buy?". Well, we're all different, and I honestly can't tell contrarians what to do (they often wouldn't listen to me). All I can say is that there is no short term recovery, so the question we've been asking ourselves has been: should we exit short? should we be more delta neutral? There again, it is up to each and everyone.
60mins: 656 could hold
RUT has reached its target, so one may have some congestion at this low level or even a short term bounce. No rejoicing though as there is not the slightest sign of a recovery.
Daily: back to lows
Like on the 60mins chart, MTFS and Entropy do not indicate any recovery. However, LEntBin is only at -1, hence this is still the same ongoing price erosion more than a meltdown. In other words, it is likely to be an absence of buyers than sellers pushing the market down.
Weekly: congestion to down
We're now back to the previous lows, i.e. a level we had clearly anticipated. It is Fibonacci PR1 which may act as a support level here confirming the 60mins MM level. MTFS still looks bearish here, but as mentioned over and over on this blog, the negative pressure can also dissipate through the passage of time.
Here again, we have NO sign of recovery, but the conditions could emerge if 656 holds. We just have to be patient.
Friday, March 07, 2008
Market Outlook NDX for Mar 7th '08
Dominant TF: 60mins, then Daily
Swings: DN-DN-DN
Market Direction (Daily): down, unless support is found soon...
Position (60mins): same March condor until expiration.
The 1750 level has been tested for resistance, only to go south again. Only too predictable...
60mins: bearish
Support level around 1688 is now in sight. MTFS and Entropy are certainly pointing down, so NDX will first reach the 1700s (Fib target and MM stall level). We'll then see if/how buyers react on and close to the strong support level.
Daily: will a support be found?
NDX is now trying to test previous lows again but 1750 technically is penetrated but not quite broken yet. The support level at 1688 on the 60mins chart, very very close to Jan 23rd lows, now seems to be the last possible support for the current trading range. Could it bounce? Well, hard to believe, but a minute chance exists still.
MTFS is bearish, but Entropy does not show much energy on the down side either so one could still hope for mere congestion at this low level, at least for now.
Weekly: quite bearish, and 1750 must be watched very closely.
Indeed no reason to be optimistic right now, but one shall always check MM and Fib levels carefully, and there is always a chance that 1750 will hold (penetrated but technically not broken).
1750 is the last defense line before we enter a bear market. Next support level would then be 1640, looking every day more plausible...
Thursday, March 06, 2008
Market Outlook SPY for Mar 6th '08
Dominant TF: 60mins
Swings: DN-DN-DN
Market Direction: breakout attempt on the down side.
Swing trading on the 60mins chart has certainly been the favorite way to trade for most, particularly those getting bored by the trading range on the daily chart. Being non-directional with a lower bias is still the way to go on higher time frames. We now have to watch whether the trading range will be broken.
60mins: looking for support
As mentioned last time, SPY was a litte exhausted at resistance level. Having said that, we expected a bit of a retracement more than a prompt return to previous lows.
The good thing is that the pattern looks much clearer now. MTFS and Entropy indeed point towards current lows, just below 133, and most problably to MM stall level around 132.
We can note that MM levels have changed though and 131.25 is now a very strong support level, which bears will also try and test.
Daily: back to lower end of trading range.
The big question is: is MTFS current behaviour indicative of a divergence, or will SPY finally recover. The 60mins scenario (dominant time frame) seems to indicate going lower first, and obviously a breakout on the down side is possible.
The current pattern somehow does not quite seem to confirm such bearish scenario, so we'll be cautious and look for a support level soon (cf. 60mins chart). However acceleration on the downside if the current trading range is broken would mean MTFS divergence, and a support level becoming a target around 125. Answer coming soon...
Weekly: bottom?
For the last few weeks, SPY has been hovering around the low to mid 130s, but we could clearly see that it had no energy to pass the first significant Fib level on the up side and both MTFS and Entropy have always remained quite bearish.
As we have said for RUT and NDX, the patterns must now complete and only a drop or a congestion at these low levels can bring MTFS to oversold levels. The key words for the time being are therefore patience and caution...
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