cf. NDX post below
Tuesday, March 04, 2008
Market Outlook NDX for Mar 4th '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. April position should be entered next week.
From top to bottom of the trading range and even lower in a matter of a few days... We knew a breakout would equate to some acceleration which indeed occured on support level at 1750 being penetrated. The bias is assuredly quite bearish, and we're now looking for a bottom...
60mins: bearish but possible pause
MTFS is indeed looking negative, however the white line is flatter and so a congestion or even profit taking from short-sellers may stop the fall for a while. It is a common scenario to see a previous support level tested as a resistance before going lower again. In such case, on could even see 1750 being hit again. The mood is however quite bearish overall.
Daily: will a support be found?
There was a breakout point at 1750, and NDX is now trying to test previous lows. There is a support level at 1688 on the 60mins chart, very very close to Jan 23rd lows, which seems to be the last possible support for the current trading range.
MTFS is not showing any recovery right now, 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: again decidedly bearish for now, but 1750 support while penetrated cannot be regarded as broken just yet.
Indeed no reason to be very optimistic right now, but one shall always check MM and Fib levels carefully, and there is always a chance that 1750 will hold if things slow down a little *, particularly if the white line reaches oversold level, where NDX could bounce at least momentarily.
1750 is the last defense line before we enter a bear market. Next support level would then be 1640.
* MTFS has some built-in momentum and can reach oversold level as time simply goes by, instead of only following price action. This means that a congestion at this low level may complete the pattern more or less the same way as a market fall would.
Monday, March 03, 2008
Market Outlook SPY for Mar 3rd '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...
Friday, February 29, 2008
Market Outlook RUT for Feb 29th '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: none, lower bias still
Position (60mins): flat - delta neutral
Options: March iron condor in place
Short Mar790 Calls, Long Mar800 Calls, Long Mar600 Puts, Short Mar610 Puts (one could also be negative delta)
Again RUT is behaving like a charm, went up to MM pivot level and is retracing a bit. Uncertainty in the market keeps it in a trading range for the time being, with a few short term buyers and still a lot of long term sellers.
60mins: modest retracement. check levels at 702 & possibly lower
RUT's retracement is just the continuation of the same trading range. Cycles are actually giving us good turning points, but we shall remain cautious with them since there is a lot of noise in prices at the moment. The MTFS shape does not indicate RUT going much lower for now, but Entropy is steadily down. We will look at fib retracement levels for possible support.
For those of you trading the 60mins chart, i would be short with particular caution on fib levels and cycle turning point. The noise level would probably make me switch to a 30mins chart or lower (10 and 15mins charts look great).
Daily: same trading range, but slight upper bias emerging
Significance level remains fairly low at this time frame. MTFS remains flat and Entropy is not helping us either. There is no reason to be particularly bullish right now, as RUT could still go either way. Despite the last 2 down days, the bias remains slightly up, yet not strong enough to toggle the Swing indicator to UP.
In absence of a market shock (exogenous factor impacting the market) it could take at least another few days for a new pattern to materialise. Until then RUT should fluctuate within a possible range: [688-719] to max [680-730].
Weekly: congestion - possible pause in current down move
As mentioned last time, we are now having a pause in this bear market, with the MTFS white line hooking up. It should not be strong enough to justify a strong recovery but the white/brown lines crossover may indicate an interruption of the fall.
625 was a strong support (688 in lower dominant time frame), as 1750 was on NDX, so the market is probably showing willingness to stay above those levels. Having said that, we have to see the end of the pattern now with the green line joining the party close to oversold levels, either after a further drop (less likely now) or just through the passage of time (higher probability).
Thursday, February 28, 2008
Market Outlook NDX for Feb 28th '08
Dominant TF: 60mins, then Daily
Swings: UP-UP-DN
Market Direction (Daily): directionless
Position (60mins): same March condor until expiration. April position should be entered next week.
On last report 3 trading days ago, I mentioned that the rise would have little momemtum, and we are again hovering around the top of the trading range (~1800s). What to expect now?
60mins: losing steam but upward bias is still there
MTFS shows lines with positive gradients, but one can see that the white line is losing momemtum before reaching overbought level. The green line will probably catch up but in the meantime, this is generally indicative of congestion, mild retracement even if the background trend remains somewhat up. Entropy confirms that scenario.
NDX will probably try and reach pivot level again, and who knows... a breakout situation may finally bring new players and take NDX to higher levels, at least at this time frame, i.e. in the short term.
Daily: nothing new really...
No change from last post: MTFS and Entropy do still point towards a congestion at this low level. Obviously, a market pattern may be forming (we've had higher lows and lower highs) so one will watch for a possible breakout over the next few days. One cannot discard an upward breakout, since 1750 is so strong.
Weekly: again decidedly bearish for now, but 1750 support still looks like it could hold
No change from last post:
Indeed no reason to be very optimistic right now, but one shall always check MM and Fib levels carefully, and there is always a chance that 1750 will hold if things slow down a little *, particularly if the white line reaches oversold level, where NDX could bounce at least momentarily.
1750 is the last defense line before we enter a bear market. Next support level would then be 1640.
* MTFS has some built-in momentum and can reach oversold level as time simply goes by, instead of only following price action. This means that a congestion at this low level may complete the pattern more or less the same way as a market fall would.
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