cf. ER2 post below for guidance.
Wednesday, May 28, 2008
Market Outlook ER2 (RUT) for May 28th '08
Dominant TF: all 3
Swings: UP-UP-UP
Cycles: frequency detected, but poor fit
Market Direction: congestion to upper bias.
Position (60mins): long to flat
Options (RUT): no change
Short Jun790 Calls, Long Jun800 Calls, Long Jun610 Puts, Short Jun620 Puts.
The upward retracement mentioned yesterday was actually a little stronger than anticipated, possibly on account of the long weekend.
About ER2, we also gave the 719 support level on last post. We're now back to pivot level... what next?
60mins: upper bias
MTFS gives some minor upper bias, however we have no clear recovery pattern. Entropy is also quite weak. Some upward momentum is defintely there after a strong day like yesterday, so ER2 may try and crawl back to latest highs. One doesn't however see how ER2 will get there without new energy (exogenous factor like a positive economic news or rising US$)
Daily: congestion, up trend still valid.
Weakening Entropy and undecisive MTFS point towards some congestion. ER2 will probably have a go at 750 again soon, but like on the 60mins chart ER2 is unlikely to pass that test level without some positive exogenous force driving it.
The picture may get clearer later this week. In the meantime, theta is on the side of condor traders.
Weekly: congestion, possible retracement
Again, no change from last post:
While the upper bias is now obivous, the market is looking at pausing soon not only to better complete the MTFS pattern but to consolidate to eventually go higher later on. We will therefore keep a close eye on MM/Fib levels particularly the combination of the two in the lower 750s. Like in lower time frames, the MTFS pattern and the Entropy do not point for a return to the bullish trend yet, so again, it is likely that a retracement or consolidation will be necessary.
We'll keep into consideration that this is a crucial phase as the pattern can reverse and on the contrary turn back to bearishness, test of last lows etc. We'll obviously have to first wait for the next pivot point and then the subsequent support level, and this can take up to a couple of months. We'll have plenty of time to come back to this in future posts.
Sunday, May 25, 2008
Market Outlook NDX for May 27th '08
Dominant TF: Daily & 60mins
Swings: UP-DN-UP (from UP-UP-UP : congestion area)
Cycles: unreliable
Position (60mins): short to flat
Market Direction (Daily): congestion
Last post was correct in terms of direction but proved to be too conservative. When I said "support must be found lower, I expected 1985 to hold at least for a while. The market decided however to retrace 100% to erase all gains this month. This didnt in the least affect our positions.
Again, we will a close look on the €/$ rate and as well oil prices which definitely influence the markets'mood at the moment.
Columbus Day on Monday.
60mins: some minor downward bias but retracement is quite possible.
The MTFS in this situation can point towards congestion to a possible upward retracement. A middle of the road congestion with a very slight upward bias is the favoured scenario. The Swing pivot is not confirmed yet.
Daily: congestion to minor retracement
MTFS is not bearish even though lines are pointing down. The most likely scenario is a congestion to a possible minor retracement. Fib PR1 (38.2%) looks like retracement target but we'll rather watch for a possible bounce on channel lows first.
Weekly: Congestion at key level
I clearly warned of a possible peak on last NDX post 3 days ago. The Fib/MM levels indeed stopped the seemingly irresistible ascension back to former highs. Having said that, there is no major change in the configuration and while the bar turned yellow, MTFS is still moderately bullish and Entropy has not peaked yet. We will therefore at most favour a slowdown scenario for the time being, but NDX could well resume its rise later on. We will remain "positively cautious" at this time frame, and wait to see how NDX behaves here as this is a key level:
Pivot number 3 (2050) could indeed turn into a full downward Fib pattern (target 1700), or could be erased to take NDX back to last year's highs (>2200). Again the cautiously bullish scenario is still favoured for now and confirmation should come within weeks. Since this is not the dominant time frames, clues will certainly arise from lower time frame indicators.
Friday, May 23, 2008
Market Outlook SPY for May 23rd '08
Dominant TF: Daily, Weekly then followed by the weekly chart.
Swings: UP-UP-UP (60mins swing probably unstable)
Cycles: still unreliable
Market Direction (daily): congestion to minor upper bias overall. Volatile.
Position (60mins): short.
Yesterday was relatively quiet, but pressure on the $ could impact the markets again.
60mins: down
The pause we anticipated on last post proved to quicly turn into a substantial retracement at this time frame. MTFS is still looking bearish so SPY could reach 100% retracement around 138.50 which also close to MM stall level.
Daily: congestion to minor retracement
SPY is now congesting ahead of target level around 145/146. We will check channel lows for support. SPY could also retrace to 137.50 which happens to be MM + Fib PR1 (38.2%). This should not impact the up trend significantly overall.
Weekly: recovery is losing steam
While lower time frames point toward congestion or some retracement, the weekly time frame does not look too alrming. We know the current MTFS pattern has not completed in oversold territory so a pause is necessary in any case before going higher. As mentioned on last post: Over the longer term there is no evidence of a straight path to last year's highs.
Thursday, May 22, 2008
Market Outlook ER2 (RUT) for May 22nd '08
Dominant TF: Daily, Weekly, 60mins dropping fast
Swings: DN-UP-UP
Cycles: unreliable
Market Direction: congestion to very minor upper bias.
Position (60mins): flat to short
Options (RUT):
Short Jun790 Calls, Long Jun800 Calls, Long Jun610 Puts, Short Jun620 Puts.
On last ER2 post, i warned of the 60mins Swing being unstable and it indeed turned negative again. Yesterday, I also anticipated a lower support on NDX... but admittedly did not see such a down draft coming. The sudden bout of attack on the US$ and the seemingly unstoppable run on oil explains it all. Not sure when all this will end up...
60mins: looking for support
ER2 may have found support on or close to yesterday's lows (Fib target and MM stall level). MTFS points lower and Entropy is relatively strong so a lower bias is still valid so yesterday's lows to low 720s could be tested again.
Daily: congestion to minor lower bias, up trend still valid.
On last post, I said: "750 looks so close yet also looks so predictable that there could be significant program selling on or close to that level". It couldn't be more true. At this level however, we see nothing more than a congestion to a minor retracement for now. We will check channel lows for possible support.
Weekly: congestion, possible retracement
No change from last post:
While the upper bias is now obivous, the market is looking at pausing soon not only to better complete the MTFS pattern but to consolidate to eventually go higher later on. We will therefore keep a close eye on MM/Fib levels particularly the combination of the two in the lower 750s. Like in lower time frames, the MTFS pattern and the Entropy do not point for a return to the bullish trend yet, so again, it is likely that a retracement or consolidation will be necessary.
We'll keep into consideration that this is a crucial phase as the pattern can reverse and on the contrary turn back to bearishness, test of last lows etc. We'll obviously have to first wait for the next pivot point and then the subsequent support level, and this can take up to a couple of months. We'll have plenty of time to come back to this in future posts.
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