Market update - Jan 20h '09

Public holiday yesterday, so volumes were obviously a lot lower. Here is a quick report anyway even if one should technically discard yesterday's price actions.

EURUSD: We're now right at the bottom of the trading range (actually 1.294 on tick charts), and we have now to see whether it will breakout from here. Fro the time being, the support should hold but the selling pressure is still quite substantial. We may reach mid 1.20s later on this week (upon breakout of course).

ER: we're following the same "failed recovery" scenario as explained over the last few market reports. We just have to wait for a support to be found where prices will pick up again. 437 seems to be that support level. Short intraday time frames give us more accurate Fib retracement levels from 437 to recent high near 470, from which prices will rise again.

ES: I mentioned on last report that we had a 50-50 scenario but 844 didnt hold so we follow the mildly bearish route, probably back to support level in the low 810s. It is likely to bounce back from there, or a little higher so we'll check for intraday Fibs here too.

Weekly Report on ES - Jan 19th to Jan 23rd '09

It is almost pointless commenting ES this week as patterns are VERY similar if not identical to ER's (see report and snapshot below). We shall therefore only mention specific key levels here.

NB: it is again recommended to swap the 60mins chart for a 32000V chart.

ES 60mins: ES is looking overbought yet is resilient and will probably aim at hitting recent highs again, and maybe the 875 area again later on. There is little energy left however so it is likely to be a bumpy ride and prices must hold above 844 to validate this scenario. This long is still a contrarian retracement trade (higher time frames) so there is no guarantee ES will not retrace at some point. For the time being we keep our long target on the high 850s.

ES Daily: Our indicators are still relatively bearish, but we certainly heed this key retracement level in the low to mid 810s which could develop to a Fib pattern back to the former highs around 940 later on. We don't see it happening straightaway though, and prices could well remain range bound for a while (60mins chart).

ES Weekly: Same weak or 'failed' recovery pattern as explained on previous reports. Those who chose to go long on an aggressive limit order must have been filled and a stop near or below last year's lows is in order. At the same time there may be no rush to enter long as ES may find it hard to take off in the short term.

Weekly Report on ER - Dec 19th to 23rd '09

Dominant TF: none really...
Swings: DN-DN-UP
Market Direction(daily): still short or out

Last week monday, i mentioned this short to a a Fib target or 460 or lower. We've now reached Fib PR2 (50%) where prices bounced a bit to target again (see Friday's report). Quite a good week overall, yet a little frustration at this juncture still as it is not easy to figure out where it could be going next. Is it the Obama effect ? We certainly do have 2 opposing scenarios on hand right now.
(To users of our technique, for better cheart readability we recommend tick/volume charts again)

As usual let's start with the outlook on EURUSD:

EURUSD: Last week, i was a little hesitant as €/$ was pointing mildly down and we indeed saw some short term support just above 1.30 where it bounced back to range high just above 1.331 (MM pivot + Fib target).
We are here again in the middle of the road not knowing whether we will be dragged up or down. We are technically still on the 1.323 Fib retracement level where it could bounce to 1.394, or should last Thursday's pivot fail, resume the fall to... 1.24! In the very short term, this uncertainty is represented by this trading range we've seen in the last few days, i.e. [1.305 - 1.331]. We will therefore again watch breakout levels carefully to determine which of the two scenarios will prevail. It is really a 50-50 chance right now, but we should go back to range lows first anyway.

Now back to ER:

ER 60mins: Upper bias is visible but this remains a short term contrarian retracement at the moment.

ER Daily: Last Thursday's pivot on 437 (MM+Fib) may have been the trigger to go substantially higher, yet it still doesn't show on MTFS and Entropy. Our favourite scenario is therefore not bullish even if one may want to grab a few points on the way up on lower time frames. We may see a little bit of uncertainty here in the next few days as there is some negative Entropy to dissipate first. By mid-week, we should have a clearer idea about our recovery scenario. (Please note that we could test low 420s still before going higher even if this is unlikely). I remind readers that i advised either going short last week on lower time frames or place an aggressive limit order going long. It is now probably too late to go short, and now some may want to be long with a stop just below pivot (<440) or try a lower long entry. Possible but never guaranteed to be filled...

ER Weekly: Concurs to our daily scenario, and virtually no change actually from previous weeks. We do have a better looking entropy and a "failed recovery" MTFS so some may sit and wait, some will be long already, some will try to enter lower, some will wait. As said above, going long with a stop below 440 isn't too risky, yet, we shall keep in mind that if 440 breaks we can then go short to 365. Answer this coming week probably...

Market update - Jan 16th '09

EURUSD;
BCE cut 50bp to bring key rate down to 2%, and this incidently happened on a pivot level for EURUSD. Technically, despite yesterday's volatility, we're not far from prices a day earlier but we can notice a change in dynamics. Again the current setup is relatively range-bound and can send prices either down to 1.24 or back to 1.40. We'll check 1.315 on the down side, and 1.332 on the up side.

ER: We would like to believe 437 (target given yesterday) was the support level we were looking for. That may be the case, but some profit taking is inevitable (steep swing on the 60mins chart, and bearish pattern isn't complete on the daily chart). Today may show some uncertainty but things should settle within a few days, and we should then see prices rising to 467, 488 and then attack 500 again.

ES: Exact same story here, with some hesitation on the daily chart, but we should eventually see 862, 875 etc. In the short term it is clear that we need to see prices holding above 844 otherwise some profit taking will be quite in order.

( posted 8:45AM UK - screenshots available on request )

Market update - Jan 15th '09

Eh eh... yesterday's quick report at the airport was spot on, wasn't it ?

ES used the former 875 support as a resistance to then trigger substantial selling. EURUSD hovered around same price range as expected, with also a negative bias. However, BCE will announce a much anticipated rate cut today which may slow down current dynamics.

EURUSD: Relatively directionless in short time frames, with some remaining bearishness yet, the 1.318 support level is technically holding. Longer term, while we do also have a lower bias, we have a potential pivot around current lows, so one should remain careful. The 1.324 level is too close to be considered as broken particularly in this volatile environment. If short, stops should be tightened.

ER: Still quite bearish and heading towards [437-441]. We are still in a "failed recovery" mode, which often turns positive later on (e.g. Cup&Handle pattern) so no panic just yet, and buying opportunities will come up soon (Fib retracement levels).

ES: Quite bearish here too and while entropy seems to have bottomed on the 60mins chart, we have to wait for a support to be confirmed either around current stall level (~828). On the daily chart, we do notice also a potential pivot point which will take a couple of days at least to materialize.

We may therefore see turning points soon... Could that be a "Obama effect" ... ?

(posted 8:15AM UK - screenshots available on request)

Market update - Jan 14th '09

Quick connection from the airport...

EURUSD: 1.318 should hold (C&H pattern) but we'll remain cautius still. This corresponds to 1.325 and 1.33 levels on higher time frames, so we believe current levels stand a good chance to hold.

ER: similar situation whereby 468 / 470 should hold and bounce in the short term. However the probability of breaking support is a lot higher. One may want to stay short, or re-enter short on breakout.

ES: same pattern with a possible short term bounce. However support looks very weak, and here too, one could be tempted to go short if 875 doesn't hold.

A connection to catch... so more details tomorrow... :)

Market update - Jan 13th '09

Looks like charts were kind enough again...

EURUSD: While the direction given on previous reports is still ok, i thought we would have more of a fight to hold support on 1.33 but at the same time the level is clearly 1.324 on the daily chart, and it could even hit 1.321. In the short term, the bias is therefore still down but i reiterate a warning that at that juncture, we may either go all the way to 1.24 (unlikely) or jump back to 1.42+ and energy based indicators favour the latter Fib scenario.

ER: down, oversold, but down. We may have a technical bounce today as the 468 level is still valid but Fib target is 460. In itself, volatility can certainly make this support level stretch to 460 but ER could also fall futher to gather more strength for the cup&handle pattern being formed.

ES: exact same scenario with 875 being the currently valid support level with prices possibly testing 864. As per ER, a lower Fib retracement level could well be the support level from where buyers will jump in (same kind of C&H pattern).

(posted 6.55AM UK)

Weekly Report on ES - Jan 12th to Jan 16th '09

ES and ER are certainly largely correlated hence it is always worth reading both reports (ER report just below). However information is sometimes clearer on either ES or ER.

So, same story as ER's with the "airhole" turning into a sizeable retracement on the lower time frames. Again, no surprise.

We remain relatively bearish in the very short term (the dominant time frame is 60mins) and again we recommend following our 32000V volume chart today. It is difficult to provide an accurate weekly report until we have tested a support level and our patterns redrawn accordingly, so please check back for our daily updates posted early morning.

ES 60mins: Same bearish pattern as ER with a target clearly in sight on 875. Fall may stop on stall level (friday lows) or slow down until it finally comes close to target. If support isn't found there, ES may retrace all the way back to late december lows (low to mid 850s).

ES Daily: While staying in the same channel, ES should hit its low boundary for support (~875) or lower near Fib retracement level (~864). We are however not necessarily bearish over the longer term.

ES Weekly: Same weak or 'failed' recovery pattern, so as for ER we know we can either trade short on lower time frames, or try an aggressive long limit order or... stay on the sideline a little longer.


NB: There will be no market update on Wed 14th.

(posted Monday 12th 7:40AM UK)

Weekly Report on ER - Jan 12th to Jan 16th '09

Dominant TF: 60mins leading, with Daily dropping lately.
Swings: DN-DN-UP
Market Direction(daily): short (contrarian trade)

Last week monday, the word of advice on ER was cautiously long and we indeed saw it peaking. I mentioned the "airhole", so again this retracement is not exactly a surprise even if i admittedly didn't predict a target withany sort of precision. Sometimes we are in a position to read direction, sometimes targets, sometimes both. We sieve through information the best way possible, and always realize we have to deal with uncertainty. Overall, we're not doing too badly here...
(To users of our technique, for better cheart readability we recommend tick/volume charts again)

As usual let's start with the outlook on EURUSD:

EURUSD: EURUSD has been relatively difficult to read on the daily chart, because of conflicting information on this soft landing scenario. The Swing is still UP, giving some credit to a pivot in the 1.33 area , even is MTFS and Entropy have turned more bearish. Will support be found lower? The next Fib target would be 1.24!! In the short term (60mins chart), we have to give 1.342 a chance to hold even though €/$ should hit recent lows near 1.33 seen on Jan 6th. The weekly chart is now also more hesitant (red bar) yet here again, we'll assume the support level will hold despite volatility levels. Weekly patterns still indicate forthcoming bearishness on the UD$ once support is found. We shall probably see a lot of uncertainty on these low to mid 1.30s this week, so check for daily updates this week.

Now back to ER:

ER 60mins: ER is now engaged in a retracement with a few target levels from 469 to 475. MTFS is somewhat bearish despite being oversold, so our lower target should be hit even if not on a straight path.

ER Daily: MTFS would tend to indicate retracement could take prices back down to 460 (or lower). Volumes are not back to December averages though, and we believe substantial buying may kick back on a salient Fib level. One should trade short using a shorter time frame or possibly position ourself soon on an aggressive limit long order.

ER Weekly: Concurs to possible daily scenario, and virtually no change actually from previous weeks. We still have a better looking entropy and a "failed recovery" MTFS so some may sit and wait, some will soon enter long on an aggressive limit order, and most will trade shorter time frames, with the above context information in mind.

(posted Monday 12th 7AM UK)

Market update - Jan 9th '09

End of this relatively uneventful week.
EURUSD yesterday turned lower but didn't quite reach 1.35 then bounced again. I mentioned this short was counter-trend so conflicting forces always make it more difficult to predict exact turning points ahead of the trading day. EURUSD anyhow followed a Fib pattern exactly to its 1st target at ~1.38 to then retrace again. The situation is the same today with a short term upper bias so we may be near the landing zone mentioned in previous report from which the US$ would weaken again.

ER: short term upper bias seems blocked around the 500 key level and as we mentioned a potential airhole (daily chart) we have to remain careful here. However there is still some buying pressure here which could take prices away from this hesitation zone. We'll cautiously follow Fib targets on the 60mins chart for now.

ES: same situation, just a little easier to read. The "airhole" is here more evident, yet targets around 927 and then 950 look so close... ES probably needs to pull back to gather strength unless some positive economic news helps the market move away from this hesitation zone. NB: the ES tick chart also shows hesitation on 906 resistance level but shows some potential for gains today if 907 now turns to support level. Answer in a few hours...

( posted 5:35 AM UK - screenshots available on request )

Market update - Jan 8th '09

Previous reports anticipate a possible peak as we noticed how fragile the recovery had been last week. Again we have however been a little surprised by the amplitude of the move but it seems that ES losing over 30 points in a single day is almost something normal these days. For instance, let's rank all log returns for ES since beginning of 2004 on an Excel spreadsheet. Then , let's have a look at extreme moves in the top and bottom 3% (out of 1266 prices), we can see that from Sep 1st last year, we've had 90 prices (about 3 months), of which 50 fall in those extreme top/bottom 3% !!! Only 40 don't. To put this into perspective, this represents daily moves over 2%. Now we better visualize what volatility is all about...

Now back to our charts:

I commented EURUSD around noon yesterday and we got our short term move to target since. We do have conflicting patterns on the daily and weekly charts so we put things in context with the current strengthening of the US$ being counter-trend (ECB rate cut expectations). Our 60mins chart shows some erosion on target with a pattern forming on pivot level now turned to strong resistance. US$ should therefore fall further to just below 1.35 . But to stay on the safe side, we'll only confirm this scenario on resistance (~1.367). The daily chart shows a possible target below 1.32 (still counter-trend from weekly pattern).
Anyway, to make it short: check behaviour on MM level (1.367) for reversal to below 1.35.

ER: We anticipated that kind of airhole on the 500 area. It is likely to be tested again for resistance to send prices a little lower. ER could shed more points to settle on a Fib level (60mins chart). Like for €/$, we'll wait for a confirmation by checking ER's behaviour on 500 first, in which case, we would have a 481 target.

ES: Same correlated patterns with prices settling lower either just below 900 i.e. around the corner, or more likely in the 887 area.


Good trading to all,
bv

( posted 6:50 AM UK - screenshots available on request )

Market update - Jan 7th '09

As usual these days, we complement our short term outlook with a tick/volume chart. Obviously it is not quite compatible with a daily/weekly report but gives a better perspective to the 60mins chart, and i invite users of this technique to build their own mix of charts with the same indicator set.

So, what happened yesterday? First EURUSD had to make me lie by a few pips... I was targeting 1.33 (1.33057 to be exact) and the market bounced on 1.33119 ... Not quite an exact science, isn't it ? Anyway, the market bounced to a first Fib retracement target to pause there. EURUSD could retrace to the low 1.34s in the short term (tick chart). Longer time frames seem to show EURUSD looking for support to probably shoot higher later on.

ER carried on its course and hit its target. I conservately gave 510s, but it actually came inches away from the Fib retracement level on 519. Now it is not clear where it's going next, however it may look for support on 500 to then go higher. This however does not mean it will go MUCH higher. The selling point is maybe just a little higher (just above 550s). We are still in a failed recovery scenario on our long term weekly chart. (NB: failed recovery may mean cup&handle or just a choppy recovery with a better limit long entry point in the next few weeks)

ES is again following a very similar path with a substantial resistance level around 937, yet a willingness to go and test 955 before retracing. We'll remain careful as buyers may just give up here in the short term. Too late to enter long anyway...

( posted 7.20 AM UK - screenshots available on request )

NOON UPDATE: a commented chart is available on :
http://ts-trading-technique.blogspot.com/2009/01/eurusd-chart-with-commentaries-2.html