cf. ER2 (RUT) post below for guidance.
Tuesday, April 22, 2008
Market Outlook ER2 (RUT) for Apr 22nd '08
Dominant TF: 60mins and weekly chart
Swings: DN-UP-UP (weekly swing was previously down)
Cycles: good fit, and possibly reliable
Market Direction: up
Position (60mins): overbought, undecisive.
Options (RUT):
Short May780 Calls, Long May790 Calls,
Long May550 Puts, Short May560 Puts
April positions expired positive. Little has changed since last post (which proved correct), ER2 (RUT) is still hovering around range highs.
60mins:
ER2 (RUT) is still at range highs, also at strong MM resistance level. This level may be hard to break but MTFS indicates ER2 not giving up just yet, even if Entropy is now very weak. Should the cycle indicator prove right, we would also be close to a peak. The MM range has narrowed to [688:719] about a week ago (upper half of previous range). This congestion may lead to a sudden breakout later on.
Daily: same upper bias, but not too convincing
The same last post can apply again today.
ER2 (RUT) is indeed hesitant around range highs. MTFS shows some upper bias, but Entropy is so weak there is at this point in time no indication of a range breakout. The most likely scenario is more congestion (i.e. same higher part of current range) for the time being.
Weekly: congestion to down bias
Yet the worst certainly seems over with Entropy bottoming out and the MTFS pattern about complete. The last few blue bars complete the picture.
To be on the safe side though, we will recognize that the MTFS while having an upper bias could well indicate some congestion at this low level still. We will wait for the MTFS pattern to complete now until then the downward pressure is dissipated, hence a mild negative bias still prevails. In case of a coming breakout on the upside, the 50% retracement level around 750 would be also quite strong.
Sunday, April 20, 2008
Market Outlook NDX for Apr 21st '08
Dominant TF: 60mins. Some may want to shift the set of time frames down to (30mn, 60mn, 240mn).
Swings: UP-UP-DN
Market Direction (Daily): up overall, but volatile still.
Cycles: very good fit, but high noise level
Position (60mins): up
I anticipated a bounce but to be honest it was not possible to forecast it would carry over to a good looking recovery. Those who switched to a faster set of time frames certainly didn't get caught here.
60mins: overbought, but where is the resistance level?
MM levels have now moved twice upward since last post. MTFS and Entropy are also looking much better. We will look for a possible resistance level on currentl levels, so NDX could well try and consolidate a further rise on MM pivot level.
Daily: upper bias remaining after strong rise.
We seem to have a Fib pattern which could take NDX higher. We have to recognise that the MTFS pattern may fail, but at the same time significance level was lower and is now picking up strongly.
No rejoicing though as this is not th emost bullish situation so we'll watch Fib targets carefully, the first one being 1910, i.e. close to current levels.
In the medium term, NDX may well reach the next level around the psychological level of 2000.
We're not there yet.
Weekly: patience...
In addition to lower time frames, it is now visible that NDX will try and aim at 2000 (MM + Fib). However, unless the MTFS pattern evolves dramatically, there is very little chance that we switch back to bull mode, i.e. a pullback is almost certain either before or after hitting 2000.
This is an important clue that call spreads above 2000 is quite safe.
As said earlier, the 2000 level will be key to market direction for the rest of the year.
Friday, April 18, 2008
Market Outlook SPY for Apr 18th '08
Dominant TF: 60mins followed by the weekly chart.
Swings: UP-UP-DN
Cycles: fairly good fit, but unreliable still
Market Direction (daily): unclear, congestion
Position (60mins): target in sight
On our last post (Apr 15th), we warned about tightening stops but the subsequent reversal (Apr 16th) admittely surprised us by its strength.
Shorting SPY following the 60mins chart was a good move indeed, which move maybe surprised us by its strength. A bit of hesitation yesterday, what to expect today?
60mins: resistance level in sight
SPY stopped its rise on stall level, and is now inches away from strong resistance level. It may go a little higher to previous highs, but energy is dissipating so no major breakout to expect.
Daily: congestion
SPY bounced on the 50% retracement and now could well test MM levels or even previous highs. MTFS and Entropy are however still pointing for congestion at best.
Weekly: on its way to test Fib level again.
Entropy is improving indicating more and more clearly that the worst is probably behind us. Yet we have to see how SPY behaves on PR1 Fib level (38.2%). significance level is high on the MTFS, indicating we're still in 'soft landing' mode more than in recovery mode, hence SPY should stay in the 130s for some time still.
Thursday, April 17, 2008
Market Outlook ER2 (RUT) for Apr 17th '08
Dominant TF: weekly then 60mins charts
Swings: UP-UP-DN
Cycles: good fit but very unreliable (low signal/noise ratio)
Market Direction: up
Position (60mins): long but looking at taking profits
Options (RUT):
Short Apr760 Calls, Long Apr770 Calls,
Long Apr570 Puts, Short Apr580 Puts
Short May780 Calls, Long May790 Calls,
Long May550 Puts, Short May560 Puts
Since last post, MM levels have changed on the 60mins chart, indicating a potential rebound on strong support level. Having said that, we have all been quite surprised by the reaction to earnings announcement. Yet, we're again in the same trading range still.
60mins:
ER2 (RUT) is now again back to range highs. It closed on stall level yesterday, so some profit taking is always possible, yet, MTFS and Entropy both indicate higher prices. 720 is a strong resistance level though.
Daily: same upper half of the same trading range
The 688 Fib support level held, which is understandable as the lower part of the trading range early March was prior to the "Fed boost". However, the earnings announcement came as a surprise still, and we don't see on our chart any reason to believe in a substantial change in dynamics in the short term. Looking at prices, the upper bias seems obvious, but MTFS and Entropy do not indicate ER2 passing the upper range boundary just yet.
Until we see evidence of a range breakout, the likely scenario remains congestion in the [700-720] range.
Weekly: congestion to down bias
I repeatedly said that we have to wait for the MTFS pattern to complete, and until then the downward pressure is dissipated, the current negative bias will prevail.
ER2 (RUT) should consolidate at this low level and a line crossover may occur soon. We'll see how a new pattern then develops. We'll also keep an eye on Fib retracement levels. In the very worst case scenario, the 625 support level would be hit, but would certainly hold. On the up side, 750 seems quite safe for our condors (Fib + MM).
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