cf. NDX post below
Wednesday, March 12, 2008
Market Outlook NDX for Mar 12th '08
Dominant TF: 60mins, then Daily
Swings: UP-DN-DN
Market Direction (Daily): no frantic buy just yet
Cycles: high noise level
Position (60mins): same March condor until expiration.
Remember yesterday: I said not to give in to much gloom and doom aand watch levels carefully. However, such turnaround is always amazing. It seems market nowadays have a volatility potential never seen before.
What lesson can we draw from yesterday? Well, first a nice 4% up move comes in the top 3% of daily log returns in the last 15 years. We have the odd occurrence now and then, however not a rare event. For instance, we've had a similar move on Nov 13th last year (yes, it was also a tuesday, but i'll let the esoteric stuff to other web sites...). That up day halted the fall until early Jan, so we may again have a reprieve if not a recovery now, i.e. we should have a change in market dynamics, so let's analyse carefully what kind of pattern will now emerge going forward.
60mins: wait and see...
3 trading days ago, i was saying: "(let's) if/how buyers react on and close to the strong support level". Now we know... Having said that, it is only if 1750 is passed again that we may have a recovery. 1750 is a far more important test level.
MTFS is certainly looking better, but it also does not show a clear recovery pattern just yet.
Daily: so what...
A great day yesterday and what change does it provide to the chart? Actually very little: the only difference is the bar turning yellow. It shows that we need to see further price stabilisation to turn bullish again. However, as mentioned above, the fall may actually be over (at least for now), so while a number of traders will jump in at lower time frames, on this daily chart, we'll remain cautious until a new pattern develops. Until then, congestion is the most likely scenario.
Weekly: still bearish, so we'll take heed at the 1750 level.
Here again, it's good to see the bar turning yellow as well. We shall however remain VERY cautious as MTFS and Entropy are still quite bearish.
I've been repeating over and over that 1750 is the last defense line and that it would be fought ferociously, so we need a bounce that is strong enough to confirm this support level. Congestion is here again the best looking scenario, as again the patterns can complete merely through the passage of time, and do not necessarily need a new fall (price-time equilibrium).
Tuesday, March 11, 2008
Market Snapshot for RUT - Mar 11th 2008
cf. SPY post below. RUT is highly correlated, so one shall here mainly look at specific MM/Fib levels.
Market Snapshot for NDX - Mar 11th 2008
cf. SPY post below (correlated charts). Since direction is clear, we will watch Fib/MM levels carefully.
Market Outlook SPY for Mar 11th '08
Dominant TF: 60mins, but weekly chart picking up fast.
Swings: DN-DN-DN
Market Direction: down, down, down... yet a support level remains a support level until it is broken. Let's avoid reading too much "gloom & doom" into current charts, and just analyse what charts really tell us and nothing more.
We observed the breakout announced 3 trading days ago on the 60mins chart, and we are since looking for a support level... Nothing can really stop SPY before the 125 level now.
60mins: again looking for support
SPY has almost gone straight down for over a week, so this is the ideal situation for a stall level (reminder; it is half way between the current "white dots" mild support and the the strong MM support at 125). The stall level this time is also close to January lows.
MTFS remains very bearish and could develop a divergence. No positive indication from Entropy either. Now since we saw the MM levels coming down 2 days ago, we have to aim for 126.40 then 125, but we can't really read more into the current chart.
Basically, no recovery in sight, and wait for a pattern to maybe develop on next support level.
NB: we left the cycle indicator on, just to show how erratic cycles can be. At this point in time, the noise level is too high to trust them. It goes without saying that this applies to any cycle detection indicator you may have acquired from popular vendors...
Daily: bearish
MTFS has shown the typical "failed recovery" pattern for a few days. In such situation, SPY can only return to previous lows... or lower. Entropy looks quite bearish, but we will give 125 a chance still. Without being overly optimistic, one can never discard 125 holding.
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 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...
Monday, March 10, 2008
Market Outlook RUT for Mar 10th '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: down, but support may and even should hold
Position (60mins): some could take profits here.
Options: March iron condor (1.5 week left). April in place:
Short Mar790 Calls, Long Mar800 Calls, Long Mar600 Puts, Short Mar610 Puts
Short Apr760 Calls, Long Apr770 Calls,
Long Apr570 Puts, Short Apr580 Puts
(again one could also be negative delta)
We saw MM resistance levels capping any possible recovery, then support level dropping on Thursday, so RUT was irremediably attracted to the strong support level at 656. Sometimes, markets are indeed very predictable.
We will have to analyse the 3 correlated markets carefully to better assess support levels.
Now, my 2 cents to those who keep asking me "is it time to buy?". Well, we're all different, and I honestly can't tell contrarians what to do (they often wouldn't listen to me). All I can say is that there is no short term recovery, so the question we've been asking ourselves has been: should we exit short? should we be more delta neutral? There again, it is up to each and everyone.
60mins: 656 could hold
RUT has reached its target, so one may have some congestion at this low level or even a short term bounce. No rejoicing though as there is not the slightest sign of a recovery.
Daily: back to lows
Like on the 60mins chart, MTFS and Entropy do not indicate any recovery. However, LEntBin is only at -1, hence this is still the same ongoing price erosion more than a meltdown. In other words, it is likely to be an absence of buyers than sellers pushing the market down.
Weekly: congestion to down
We're now back to the previous lows, i.e. a level we had clearly anticipated. It is Fibonacci PR1 which may act as a support level here confirming the 60mins MM level. MTFS still looks bearish here, but as mentioned over and over on this blog, the negative pressure can also dissipate through the passage of time.
Here again, we have NO sign of recovery, but the conditions could emerge if 656 holds. We just have to be patient.
Friday, March 07, 2008
Market Outlook NDX for Mar 7th '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.
The 1750 level has been tested for resistance, only to go south again. Only too predictable...
60mins: bearish
Support level around 1688 is now in sight. MTFS and Entropy are certainly pointing down, so NDX will first reach the 1700s (Fib target and MM stall level). We'll then see if/how buyers react on and close to the strong support level.
Daily: will a support be found?
NDX is now trying to test previous lows again but 1750 technically is penetrated but not quite broken yet. The support level at 1688 on the 60mins chart, very very close to Jan 23rd lows, now seems to be the last possible support for the current trading range. Could it bounce? Well, hard to believe, but a minute chance exists still.
MTFS is bearish, 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: quite bearish, and 1750 must be watched very closely.
Indeed no reason to be optimistic right now, but one shall always check MM and Fib levels carefully, and there is always a chance that 1750 will hold (penetrated but technically not broken).
1750 is the last defense line before we enter a bear market. Next support level would then be 1640, looking every day more plausible...
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