Weekly Report for ES - Oct 13th to 17th '08

OK, last week was a terrible bloodshed we followed day by day, and we now wonder after Friday's bounce if there could be more...
We'll give a chance while staying very cautious. More than ever before, short time frames are recommended as they do respond better to shocks, spikes, or high frequency dynamics in general.

ES 60mins: again it is a still a little to slow and at this time frame, while there is a recovery in progress, indicators have not responded fully, and we need to pass the 24% and test the 38% Fib retracement level first. A long way to go...
In the meantime, we may see the "hangover" mode for a while until confidence returns to the markets. Staying above 875, and then 925 would be good enough for now before attacking 1000 (Fib level).

Daily: No rejoicing yet
While we are seeing an interesting bounce, here again, we have to wait for Entropy to bottom up and for MTFS to crssover nicely. Until then, we may see some congestion below 1000, which will be THE test level going forward. If volatility stays this high, we may see 1000 being tested within a couple of days. I would give it a week...

Weekly: dangerous still
We still have a pretty bleak picture here and Fib/MM targets do not look too good. Obviously extreme volatility often causes levels to be stretched without breaking making scanerios difficult to separate. Again, we'll see whether 1000 is tested and passed soon, taking into consideration that bears could try and take the market somewhat lower...

ON ACCOUNT OF THIS EXCEPTIONAL MARKET SITUATION, SNAPSHOT UPDATES WILL BE POSTED ON THIS PUBLIC BLOG THIS WEEK AGAIN

Weekly report for ER - Oct 13th - Oct 17th '08

Dominant TF: Daily (we notice a drop in significance level on the 60mins chart)
Swings: UP-DN-DN from DN-DN-DN
Market Direction(daily): Short with tighter stops now. Nothing wrong with staying cautiously away until the end of the storm though.
Options (RUT): better wait for the end of the storm here too. Good premiums for November positions though

Last week's report (monday pre-market) wasn't far off the mark and while we were hoping for a bottom, we knew the hemmorhage was still there and we saw more more blood gushing out in an almost panic situation. The concerns are valid, but markets are clearly overreacting now. We do need time to evaluate damages to the real economy while investors come back to their senses. The spreading outside America has been blown out of proportions and we will realise shortly that the crisis can be contained to an extent, particularly if consumer demand in emerging markets picks up (excess) consumption given up by cash-stricken Americans. Overall the economic situation may be not as bad as it looks now, even if the political cost for America and the western world in general will be ENORMOUS. Don't read me wrong: this is still by far the worst crisis since 1929 ! There will be a before and an after October 2008 in history books !!!

Anyway, let's get back to the charts:

EURUSD: I obviously underestimated volatility and my target was way too shy. EURUSD is absolutely ready for a radical bounce and yet we don't see clearly which level would be strong enough to it. Do we have to lose more ground? That does seem quite logical indeed so lows could be tested again. Short sellers must just be careful of the coming reversal and should therefore follow shorter time frames.

ER 60mins: not out of the woods just yet
OK, we've had a reassuring end of week bounce, but can we start buying? On short time frames, we're long already with due consideration it is still a contrarian trade. 500 should be tested for support to go higher, so one should not expect volatility to come down too quickly. We'll watch the first Fib level and a possible channel break to reinforce a long position.

ER Daily: still down, but congestion is likely now.
Those who followed my advice to go short last week were right. The support levels broke one after the other, yet is it different now? 500 hasn't been broken technically even if stretched to the limit by current volatility levels. We are however no way near a recovery situation, but in "hangover" mode at best. Any bout of selling can still send ER much lower. Having said that a few days with ER hovering around 500 would be good enough to signal a trough on Entropy and may calm down our MTFS green line. As always, we'll keep an eye at the shape of our MTFS crossover to validate a turning point.
Again current volatility acts as a time compression factor so can make this scenario happen any time from the 1st hour of trading on monday to maybe wednesday or thursday.

ER Weekly: this is a market crash, and this time frame is obviously completely out of synch.
Reading a weekly chart at this point is useless. All we can say is that support levels are still valid with a clear drop in one week from 625 to 500, and this high frequency or spike will have tremors visible on shorter time frames for at least a couple of months. This low levels should hold, yet we keep in mind there is more downward potential (~440)

ON ACCOUNT OF THIS EXCEPTIONAL MARKET SITUATION, SNAPSHOT UPDATES WILL BE POSTED ON THIS PUBLIC BLOG THIS WEEK AGAIN

Check oil level... engine is overheating...

Yesterday, my targets were too 'shy' in this mad market and now, I'd hate to play "Cassandra" but the whole system is on the brink of collapsing completely. If ES breaks this lows around 875, we can lose up to another 20%... and eventually hit 720...


EURUSD: US$ may strengthen a little more, but a congestion is more likely in the short term. Technically EURUSD is ready to shoot up but again, the spark is not there yet.

ES: Regardless trading opportunities, we're really in deep s**t now if the market doesn't hold these lows. We'll check volumes as a bounce would make sense even if only temporary...

ER: Same trouble... I would hate to believe we're aiming at 438. Let's give a bounce at current lows a chance.

We must be very careful that in times of EXTREME volatility, support levels can be penetrated deep without breaking. A bounce would validate the supposedly strong levels given yesterday.

(screenshots available on request)

Oh well, just another few hundred billion dollars of market cap evaporated yesterday...

At least the business of printing money is booming... Anyway, no sarcasm and let's just focus on our charts with a caveat first: A support level is a support level, or until it's broken, it's not broken... May sound silly, but many traders read too much in charts, and tend to project their fears on the market. Let's just try and be rational. Again, we'll leave the more fundamental analysis for later.

EURUSD: Yesterday's range was valid, and while we have an upper bias in the short term, we need to confirm 1.3672 as a new support to go higher. It's really ready for it... just waiting for the spark...

ER: The 531 level given 2 days ago is more than valid still even if one should not overlook the enormous downward pressure that is still present in the background. While we can a lot of fun in short time frames, short sellers could maybe tighten their stops a bit. No rush to go long on hourly charts and above.

ES: The equivalent level on ES was just below 970 (see previous posts) and is also holding for now. However, only a clear passing of 1000, then firmly tested for support could announce the end of trouble, and that's certainly not visible yet. The dynamics are otherwise very very similar to ER's.

Should sellers wish to give a last bout before the weekend, we'll look for a bottom in the 500s for ER and 930s for ES. We'll also check for volume to make sure this bear trend is fully exhausted.

(screenshots available on request)

"The end of the world as we know it..."

Again volatility is playing tricks and it is difficult to pinpoint market celerity accurately, or i have maybe neglected that part of analysis until now. I said yesterday that the €/$ would stay above 1.355 and that we should play ER and ES from the top of the intraday wave down and down... That's exactly what happened.

Now, the markets are now in dire straits and we can only hope the next support level, our short target for now, will hold for the sake of keeping the financial world in one piece... Long term consequences will be dramatic for the western world to say the least. I might come back to a more "philosophical" analysis when this spurt of market chaos is finally over. Now for today:

EURUSD: Downward pressure with still some resilience from the Euro which will try and stay above current support line. A breakout is always possible but unlikely. Arbitrage may happen against other pairs... if players now dump both currencies together...
Technically EURUSD is still looking for support in the 1.354 - 1.367 area and this explains the uncertainty in this range.

ER: Heading straight for 531. We've discussed price segments in many previous posts and we all know markets move in fairly well defined discrete steps. Our problem is the energy carried in the movement. Again, this situation will take a LOOOOONG time to heal.
if 531 doesn't hold, the market will try a round number, i.e. 500, but we can't discard a final bottom to be found in that area. Time-wise, it is very difficult to say when this could happen, but wouldn't be surprised if that is before the end of this week.

ES: Hard to believe it would sink much further. The market will try and get to stops below 1000. Again we'll watch steps of 31 points... with an eventual target in the 925-940 area ! (with a possible pause half-way in the 960s)
I wouldn't dare predicting when such target will be hit though...

(today's screenshots available on request)

PRE-MARKET UPDATE: we've had a bounce on ES at 963 i.e. a few points below the 1st "31-point segment" at 968.

Bloody monday...

Oh well, didn't i say yesterday it could only go down... On ER i dared mention a possible target of 577 without thinking it would be reached so quickly. On ES i gave a target of 1065 which was reached in the 1st hour of trading ! Defeats the point of a so called weekly report, doesn't it? Remember: Volatility is a form of time compression in itself.

So what's in store for today, considering the above.

EURUSD: same down channel for now, yet levels haven't yet changed. In the short term, €/$ should try and stay above 1.355 but there is still a long way to go to break the channel upward and there may be a few interest rate cuts here and there to shake the system a bit. Sticking to short time frames is therefore most recommended.

ER: is the worst over? maybe, but again we have to go through a 2nd hangover period and no substantial recovery in sight. We need a sort of double bottom of cup & handle to confirm yesterday's lows as a support level. Short intra-day time frames should be good fun though. If anything, pick the top of this wave and sell short again in the dominant trend. Staying on the side line until volatility subsides is also fine.

ES: Same situation. Yesterday ES fall stalled... on MM stall level, so it's good to see indicators still responding fine in this mayhem. Now, same diagnostic with a similar need for a confirmation of a bottom.

There are lots of bargains in the market right now, and this shake-up will only eliminate the weaker ones...

Believe it or not, markets also follow the laws of Nature...

(screenshots available on request)

Weekly Report on ES - Oct 6th to Oct 10th '08

Dominant TF: weekly, 60mins with Daily lagging behind
Swings: DN-DN-DN (from UP-DN-DN)
Market Direction(daily): short or preferably flat. Following intraday time frames is most recommended, but staying on the side line is fine too.

I wish i could be more optimistic than last week, but the outlook is still negative. It seems that the maket is looking for a bottom even if the worst is technically behind us now. The accumulated mistrust for the several shocks coming one after another will take a loooong to time to digest, and we therefore see no immediate bounce after the bottom is found (1065?)

ES 60mins: a tad too slow to trade in this mad market
Same as last week, we recommend lower time frames here. We can still use this time frame as context, with a target on 1065, i.e. still quite some room downward...

Daily: where is this going to end?
In this high volatility bearish market, we try and pick our targets and it seems we have a good consensus around 1065 - 1070 (MM - Fib) All indicators are pointing down but we'll keep a close eye at our target range now.

Weekly: no mercy...
Negative bias here too of course and a high probability that the market needs to test a bottom quickly. 1000 is now in sight but we have a convergence of targets around 1060 here too which we will have to hit to exhaust sellers, hopefully for good... As said before, the hangover may last quite a while, so i see no rush to really go on a "shopping spree" after the market has settled.

ON ACCOUNT OF THIS EXCEPTIONAL MARKET SITUATION, SNAPSHOT UPDATES WILL BE POSTED ON THIS PUBLIC BLOG THIS WEEK AGAIN

Weekly Report for ER - Oct 6th - Oct 10th '08

Dominant TF: Daily (we notice a drop in significance level on the 60mins chart)
Swings: DN-DN-DN from UP-DN-DN
Market Direction(daily): short of course, but staying cautiously away isn't a bad idea either.
Options (RUT): better wait for the end of the storm here too.

Last week monday, i warned again that we couldnt see the end of it, and i have to say the bottom is still to be found even if it may at last occur this week now that the bailout plan has been approved. Certainly not visible yet, but chances are that prices would settle soon. A number of banks and financial institutions are now ready to go shopping for bargains.

EURUSD: crazy week for €/$, which we followed fairly accurately on shorter time frames. Yet, volatility still surprised us with targets hit much quicker than anticipated. The 1.3672 level was broken in short time frames indicating a possible target on 1.3521. We'll be QUITE careful though as the € could also bounce strongly. It certainly looks possible on longer time frames.

60mins: drifting down again
Where and when is this fall going to stop ?? 625 looked like a very reasonable support level and breaking it now opens the way for a seriously bearish market. Are we really now targeting 577 ? Only a quick bounce early in the day would keep the 625 level valid.

Daily: down !
Tiny chance of a support level around 610, but is this wishful thinking...? All indicators are down, and looking for a support level right now in such a high volatility environment is ludicrous. Again, either carry on trading short time frames in the direction of the daily chart, i.e. short, or stay on the side line for now

Weekly: market crash... there is no other word for it
While 625 is not "officially" broken, it is not looking good.
We'll give it another chance this week still, as the market could digest the bailout and volatility settle a bit. This headache must stop first.

ON ACCOUNT OF THIS EXCEPTIONAL MARKET SITUATION, SNAPSHOT UPDATES WILL BE POSTED ON THIS PUBLIC BLOG THIS WEEK AGAIN

Bottomless ?

At least EURUSD is going exactly where anticipated. It reached our 1.381 target and could find a support at this level. We can't however dismiss the possibility of testing 1.36720.

ER: Aiming at 625 although it could bounce on stall level here around 640. Down pressure is certainly too strong to expect any recovery soon, unless of course another exogenous shock abruptly changes dynamics.

ES: Trying desperatly to find some support around 1125, the market would otherwise shed more... In case of breakout, target would be 1072.

Conclusion: again & again, same as previous days i.e. have fun on short intraday time frames or go enjoy indian summer. No rush to get back into the market.


NOTE: Sorry but won't be available this Friday. Back to normal on Monday

Mid Week Update

Markets are still in 'hangover mode' with a US$ strenghtening. The target range given yesterday [1.381-1.384] is still valid. There is some support on 1.391 in the short term, but the € could even hit 1.3672 within a week.

ER: You will notice i was spot on yesterday. Slight upper bias could take ER unconvincingly a little higher, even to pivot level in in 680s. This does not mean in the least a recovery and the same congestion/volatility yo-yo situation is still in place.

ES: Retraced quite a bit in pre-market but ended around the 1165 area again. If passed, ES should normally test low 1180s. However there is still little energy in the market and any adverse news can stall this upper bias.

Conclusion: same as previous days i.e. have fun on short intraday time frames or go enjoy indian summer. No rush to get back into the market. It will still be there where you're back from holiday.

(snapshots available on request)

Crazy Tuesday

What a day again... we all wonder whether we'll all have more of those... great for intraday trading, and certainly not so on the daily time frame.

Yesterday was a good day for the US$ which easily broke the 1.416 pivot level. We're now back at testing the 1.381 - 1.384 levels on EURUSD over the next few days (or less...). Obviously nobody sees a strong US$ in the medium term but we'll go with the flow as always...

ER: good recovery as hinted yesterday. We also notice our price segments still work after bouncing on 656, to reach 688, i.e. 2 price segments. Another down day is likely until this yo-yo calms down along with volatility. We could get back to the low 670s today. We anyway need to go through this hangover period before going solidly up.

ES: similar situation here except that ES didn't have enough steam to even test 1188 (was a good day though). 1165 is an important level, and ES is unlikely to hold it so here again another down day is expected.

Obviously bailout news will impact volatility again, but it seems market participants have had enough of it, and we could see markets behaving a little more normal in a few days... yet again 3rd quarter results may spur more nervousness again...
Daytraders have more fun ahead, but more conservative long term investors need more time to test the water.

(snapshots available on request)

Black Monday

Yesterday again I warned to be cautious and even to stay away from the market. Intraday trading was about OK in the morning but prone to execution problems.

What can we expect for tuesday?

ES: prices found some support on 1125, the MM level even if penetrated, can be regarded as holding. Having said that, it is clear that a LOT of uncertainty remains in the market and a lower bottom is possible (1070?). After yesterday's shock, a technical bounce is likely even if not visible yet.

ER: Same - Despite the bloodshed, it seems there is also a support level here (656 on MM, 645 Fib), and also a lower stronger level at 625.

Again, I recommend staying on the side line until volatility comes back from stratosphere.
--- DO NOTE HOWEVER THAT THE MARKET COULD THEN ALSO QUICKLY GET BACK TO RANGE HIGHS ---