Dominant TF: Weekly followed by 60mins.
Swings: UP-UP-DN
Cycles: upturn indeed but doubtful reliability
Market Direction: Upper bias, and more indication that fall may be over, but no substantial recovery in sight just yet.
The Fed's massive rate cut certainly had an immediate effect but cautious optimism must still be exercised among bulls and contrarians. At the same time, bears may want to tally their profits and take it a little easier now. Being greedy could eventually prove costly.
60mins: nice bounce indeed
We do notice that the turnaround happened on Fib target as wll as MM stall level... The Fed cut, or any positive news certainly has a stronger impact when the conditions are right like on Monday afternoon.
MTFS and Entropy certainly are looking good, but SPY is only at range high and EntBin already culminates at 5, so profit taking is quite likely. In such case, we would have a range shift, i.e. SPY tesing pivot level to try and stay in the higher part of the MM range now (i.e. pivot to strong reistance further up).
Daily: no recovery but watch out
Reaction to the Fed cut induced a MTFS divergence. Entropy also bottomed on Monday already. The recovery is however not comfirmed yet, and as on the 60mins chart, SPY may just jump to the higher part of the sam erange since January, i.e. more or less within the [132-138] range.
Weekly: are we out of the woods?
Any move away from the nerve-wrecking 125-127 test levels is good, but too early to say that the worst is behind us. So, no rejoicing just yet. MTFS is still quite bearish, so is Entropy. Obviously, with EntBin at -4 (min is -5) one tends to think a bounce is in the cards, so SPY could go higher and alleviate pressure on MTFS. All in all, we would then see completion of the MTFS pattern within 4 to 6 weeks, and be in a better position to go higher then.
Level-wise, it is quite clear that the test level will be 137.50 support last year, then resistance earlier this year. It would be good to see it passed then tested as support again. It could however take a while.
Again and again, for the time being, patience and caution must be both exercised.
Wednesday, March 19, 2008
Market Outlook SPY for Mar 19th '08
Tuesday, March 18, 2008
Market Snapshot for EURUSD - Mar 18th 2008
EURUSD snapshot. This pair could show interesting patterns over the next few days and weeks. (cf. previous posts and 'twin' blog for interpretation)
Market Outlook RUT for Mar 18th '08
Dominant TF: weekly chart, then daily and 60mins
Swings: DN-DN-DN
Cycles: unreliable (low signal/noise ratio)
Market Direction: same trading range
Position (60mins): short but target in sight.
Options:
Short Apr760 Calls, Long Apr770 Calls,
Long Apr570 Puts, Short Apr580 Puts
I warned on last post (Mar13th) that there was no recovery potential. We indeed went back to support level as anticipated. What next?
60mins: aiming at lows again but some relief could be coming
RUT went back down to the MM support level, and even penetrated deep enough to almost test previous lows. Furthermore, it is possible that the last 2 bars testing 656 as a resistance level now is paving the way to go lower. Previous lows are in the low 640s, then there 632 is a Fib target. MTFS looks bearish, but a support could be found at current levels or a little lower (white line diverging) and Entropy is now picking up a bit.
Daily: same as on the 60mins chart, i.e. more price erosion but a support could be found soon (625?).
The trend is undoubtedly down, but we have Entropy bottoming out and maybe a little bit of a divergence on the MTFS white line. The momentum should however take RUT a little lower, and even possibly hit 625 at some point.
Weekly: nothing new, i.e. congestion to down
We're now back to the previous lows, i.e. a level we had clearly anticipated. We're on Fibonacci PR1 as well as MM stall level, which may cushion or even stop the fall also confirming levels seen on lower time frames. MTFS however still looks very bearish here, but as mentioned over and over on this blog, this negative pressure can sometimes also dissipate slowly through the passage of time. For the time being, we have NO sign of recovery, and should the current level fail to resist this on-going down pressure, 625 seems a reasonable target for now... Only the completion of the MTFS pattern will tell us when the fall is finally over.
Monday, March 17, 2008
Market Outlook NDX for Mar 17th '08
Dominant TF: Daily, then 60mins
Swings: DN-DN-DN
Market Direction (Daily): congestion to down
Cycles: high noise level
Position (60mins): neutral to negative delta. short.
The trend is still down, and technically the incapacity to pass 1750 does not bode well for the next few days and weeks.
60mins: down but...
The MTFS pattern points down, so does Entropy. However, a support should be found within a few bars. NDX should stay in the lower part of the [1688-1750] range. The fact that 1750 has turned to strong resistance indicates a difficulty going higher anyway. We'll watch the Entropy bottoming out for a possible sign of a support, probably close to the bottom of the current range.
Daily:
Last time, i warned against getting carried away by the strong up day we had. We indeed saw no follow-through and we are still in a 'price erosion' mode.
Failing to pass 1750 would certainly point to a lower support, possibly around 1625 (125 point interval between salient MM levels).
Weekly: again and again, it is bearish...
But Entropy is so low (EntBin = -5) that a bounce must occur sometime soon. Difficult to know exactly when though. The 1750 support level looks like history, but there is a minute chance it can still hold if the forthcoming bounce is strong enough to stop the fall.
Friday, March 14, 2008
Market Snapshot for EURUSD - Mar 14th 2008
Here is the EURUSD forex pair.
The technique being universal, i thought it would be interesting for some to have a look at a forex pair. This chart won't be commented on this blog though. I might also change pair from time to time i.e. no intention to provide forex trading advice for free.
There is indeed currently a LOT of interest on the toolset and trading technique for forex trading. For the time being, there is only one type of license for any TradeStation symbol, but this may change in the future.
Market Outlook SPY for Mar 14th '08
Dominant TF: 60mins, but weekly chart picking up fast.
Swings: UP-DN-DN
Market Direction: same indecision, so too early to say we're out of the woods...
Looking back at yesterday's post on RUT, I hope you will take note of the MTFS pattern on the 60mins chart. It is a classic one, hence my assertion RUT would come and hit support level again. The later recovery was stronger than i thought, but it was an excellent day for a successful short then a long entry.
Now what do we see today?
60mins: again, not much steam
SPY is highly correlated to the other 2 symbols on this blog, but we'll try now and then to check whether levels are clearer on one or the other. This time again, we're back in a trading range looking for direction. There is some momemtum left, yet sellers are far from being exhausted and pushed out of the market, so we'll have to accept some ambiguity direction-wise, or move to lower time frames. On this market triptych, the weekly chart gives overall context, and one could move to a lower time frame 15 or 30 mins for direction.
One shall remain very cautious with long entries.
Daily: bearish
On the last SPY post, I wrote of a "failed recovery" pattern. MTFS and Entropy at this time frame are still quite bearish, hence still indication of a strong rebound despite what we've seen earlier this week. Caution MUST be exercised. The outlook remains the same, i.e. a trading range [125:140], which can be traded with condors. Delta should remain negative or neutral.
Weekly: bottom?
Copy/Paste the last post, i.e. no significant change:
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.
Correction:
Got my calendar wrong on options expiration the other day. It is obviously next week.
