T.G.I.F.

Just a gentle reminder that a swallow does not make a market rally (euh?) and i warned that the "1000" battle on ES would not be an easy one. I'm afraid we'll need at least another round and for now we'll have to see how and where buyers gather forces...

EURUSD: As mentioned yesterday, we have a strong support level just below 1.27 and while we have some bounce potential at this point, the underlying forces should keep some pressure on any substantial recovery.

ER: We're now sitting on 500 with some remaining downward pressure. However the market will try and dissipate that energy without breaking that support level. Should it break, the next level is 483, but odds are more in favour of a bounce right now.

ES: The fall stopped on Fib PR2 and we're back into a [906-937] price segment, and as a matter of fact, we'll have to break that 937 level to go higher and eventually battle again. We're not there yet though and we should end this eventful week on a relatively uneventful day, probably slightly up. Time to heal the wounds now...

"Sell the news"

We're all happy for America, and yesterday's retracement doesn't do that extraordinary day any justice. Markets dynamics were widely anticipated, so no surprise whatsoever. Now let's see what charts tell us today:

EURUSD: taking a breather, but 1.27 is a strong short term support for now. We don't have any significant forces taking €/$ either way in the short term, but this drifting should continue for now.

ER: Volatility is certainly still around and retracement was stronger than anticipated. It is now in oversold zone, so not clear whether the 500 level will actually be hit. There is no reason to believe ER would actually go lower, and if one goes back to previous reports, one may actually be in the predictable situation of the 500 area being the actual start of a better looking recovery.

ES: Same scenario here, where 937 being so anticipate that it could bounce anytime. Obviously, if the bounce does not happen, things could get very wrong (bearish outlook to the low 700s already mentioned a couple of weeks ago). Probability is however low.
We're now back to a more normal trading environment with price segments in place (32 points wide). Recovery can therefore bring ES back to the high 960s, to then in the medium term attack 1000 again...

... to be continued ...

"Yes, we can"

Great day for America and for the world at large. Not much of a surprise, but a great day nonetheless. Difficult to gauge the short to medium effect to the markets as this is virtually a non event i.e. been priced in already, but we can probably assume the worst is over even if we're now in for a long convalescence.

So, is this going to be just another day today?

EURUSD: taking a pause right now, but swings are clearly identifiable on the 60mins chart. Over the medium term, the US$ should weaken a bit the the next Fib/MM level.

ER: also taking a pause at stall level just south of 550. Difficult to say whether the market is ready to test 562, and as we all know the adage says "buy the rumour, sell the news" so we may just see some retracement today. Shorter time frames will help with determining a direction for the day. Mid term, i.e. by end of week, it is clear that we have to test the 562 level.

ES: Here the 1000 level has been already hit, and we have a target in the 1000-1010 range so it is difficult to anticipate what's coming next except these are serious resistance levels. No offence to the new President Obama, but the markets may not necessarily rally as much as voters and citizens of the world on this new dawn for America.

Obama Day

Are we waiting for a big Obama party today ? Are we confused between this early market recovery while the mess is not fully cleaned up still ? Is it yet another eye of the storm ? Yesterday was certainly calm in relation to the volatility we're now almost used to, except maybe for €/$ which broke the 1.27 MM support level to reach a Fib target around 1.255.

EURUSD should carry on hovering around same levels, and we recommend using a tick chart for intraday movements. The lower bias is still there at the moment but as said earlier, it could well bounce because 1.27 is actually stronger than the deep penetration we've seen could imply. If now tested as resistance then we will look at a lower target maybe back down to the 1.22 levels.

ER: Stalled short of 550, on its way to 562. A retracement would be in order but ER is holding nicely at these levels. One cannot discard either scenario right now, so ER can just as well go and test 562 or retrace back to low 500s again. In the short term, ER is still pushed slightly upward but the bias is fading at the moment. Will volatility play tricks again on Obama Day?

ES: If we try and make an overall picture of the markets, ES is not so bullish and is certainly indicating a need for a lower time frame. Secondly, MM resistance level has come down so we may find difficult to even come closer to the 1000 battlefield. Are belligerants ready for it? The target is there, but here again are we going to retrace first? Like for ER, we still have a very weak unconvincing upper bias for now...

(snapshots available on request)

Weekly Report on ES - Nov 3rd to 7th '08

Markets are again largely correlated so we again always recommended reading this report in conjunction with our latest ER report below. Dynamics are indeed similar except that we may be tempted to look at shorter time frames such as 30mins. In terms of levels, we do notice a bottom last week on MM stall level (60mins) where it was even clearer on ER, but the picture is clearer overall, and we now have to gauge whether the market is now ready for the "1000" battle...

ES 60mins: on stall level
ES is slowing down on stall level (~968) as we could expect it. We may lack sufficient energy to reach 1000 this monday but this will happen sooner or later anyway. We'll check Fib/MM levels both from this stall level as well as from 1000, and our MTFS/Entropy shall tell us which we to navigate. A lower time frame will also be helpful here.

Daily: Preparing for battle
1000 is now around the corner. However, at this point in time, we don't see ES sailing through that important level and some retracement on 1000-1010 seems inevitable. Such retracement could send prices back to current levels, so we may have high volatility, wild swings... to maybe end the week almost unchanged. We'll follow the possible scenario day after day anyway.

Weekly: no rejoicing just yet!
We still have no evidence whatsoever of a forthcoming recovery and current volatility may cause amazing whipsaw movements. We have to remain very cautious if we want to invest long term. This is a time for intraday traders...

NB: Like for ER, daily updates will be posted on this blog this week again.

Weekly Report on ER - Nov 3rd to 7th '08

Dominant TF: Daily, 60mins with the weekly chart obviously a little lost in this environment.
Swings: UP-UP-DN from DN-DN-DN (have we bottomed ??)
Market Direction(daily): cautious retracement trade, i.e. a backlash is still possible
Options (RUT): good time to sell a put spread, but staying on the sideline a little longer is also fine

Last week monday, we had that moment of hesitation between a 500 level that wasn't technically broken, stretched to the limit because of the extreme volatility we've been going through... and a continued down pressure that anticipated a much lower target. We therefore recommended to stick to the 60mins chart and possibly even lower. The 60mins chart indeed confirmed a strong support level around 440, which triggered some substantial short term buying.

We still have some uncertainty regarding the effect of deleveraging on the markets now, so it remains difficult to anticipate a strong recovery. We shall therefore remain cautious this week again.

Now, let's have a look at our charts:

EURUSD: €/$ came very close to MM stall level, bounced, and now found support on 1.27. We now have a first target on 1.29, and while we still have an upper bias, €/$ may hover around low levels for a while. Again, deleveraging and banks recalling US$ loans massively can cause the US$ to strengthen further. We all know the amount of US debt could and even should send the US$ to recent lows so... again caution must be exercised on our usual time frames. We will stick to the 60mins (and lower) charts this week again.

ER 60mins: stall level in sight.
We've seen a good recovery and a target is now close. ER should hit the MM stall level just belo 550, or even MM resistance later on (~562)
Again volatility keeps on playing tricks on us, so the normal subsequent retracement could happen this monday, or by mid week. 500 would be a good support to take prices higher.

ER Daily: are lows behind us ?
We now have substantial evidence to believe so and we have a target price (563) which is exactly on the 60mins resistance level. On the medium term though, we need more energy which could be found on a 500 support level again. We have the US elections tomorrow, so market dynamics may obviously be somewhat affected. We will be cautiously optimistic and look for buying points this week. We can always set stops below 500 in case a forthcoming recovery fails this time again.

ER Weekly: ?
Significance level is lower so we will not pay too much attention to MTFS and Entropy. However a straightforward recovery (blue bar) is very very unlikely. We have to admit this crisis has surprised us already but there is nevertheless still a LOT of downward pressure to dissipate, so it is way too early to rejoice and buy frantically into this market. Again, we'll have to keep this time frame as background info only and follow the 60mins charts rather.

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

... going with the flow ...

Is the bottom behind us? I've been undecisive lately as it can be so, or at the same time, we may still see a full-on purge to the low 700s on ES. We have certainly seen some improvement, now let's have a look where it could lead.

Note: there will be no report tomorrow, but i'll try and post a short update on market close.

EURUSD: good recovery and resistance have been broken leading the way to 1.32 ... or even all the way to 1.37 ! Our MM stall level (~1.22) was not quite reached and our scenario is now updated to a possible return to 1.27 Obviously, we have conflicting pressure from deleveraging currently strengthening the US$ and the phenomenal amount of public debt which should weigh on the US$, so volatility is here to stay in the short term.

ER: Testing 500 now. Is it going to break it...? Probably not, but who knows. Most would be long now (60mins chart) and would just tighten stops a bit just in case. It is so far only a retracement trade (contrarian) on the Daily chart. Again, on a middle term outlook, ER is likely to go lower at least once more.

ES: Are we now going for the big "1000" battle? Possible... Again, one should only go with the flow. 967 is a MM stall level that was hit yesterday, so we'll watch that level again today. One could then either try and hit 1000 or just as well retrace back to 930s.

Keep an eye on shorter time frames, and watch out for more volatility on GDP Q3 announcement tomorrow.

... a ray of light ...

Oh well, yes, i got it wrong yesterday. It does not happen too often, so i won't take it too badly. We had a support level around 843 on ES, and a pivot level around 875 and those levels were cleared marked on our charts. What happened was a sudden breakout effect to the next resistance level. This is nothing new and charts reacted very well. Regular readers now know that we always have to analyse those price jumps in the light of quantum dynamics, i.e. prices being attracted to predefined levels.
Secondly, i repeat again that high volatility acts as a time compressor which requires looking at shorter time frames. This is also why i still publish daily updates on this blog dedicated to weekly market reports, and it is sometimes not even enough.

Do we have to now jump and buy frantically? I'm afraid not. But let's first have a look on our charts:

EURUSD: We have a target around 1.27 to 1.274, and we have to see whether 1.27 will now act as a support to go higher. It is unlikely though. This bounce is likely purely technical. We keep our mid term objective in the 1.22 area, with continued volatility. A bottom may be near.

ER: Nice rebound to Fib PR1. Obviously one would need to see 500 passed and even tested for support to see a change in trend. We may have a 2nd up day but no major reversal right now even if again volatility plays tricks on us.

ES: Levels are even clearer here, with 930 being a strong resistance ahead. There could be some carry-through, either technically motivated, or from some start of herd effect, but we're not out of the woods yet, and there will be opportunities at cheaper prices still.

Over the longer term, we know we have an absolute bottom either around 843-875, i.e. just behind us, or in the low 700s still. The massive amount of negative pressure has to dissipate in one way or the other, with a much awaited decrease in volatility. This has to take at least a few weeks and possibly until the end of the year. Difficult to say whether markets will sink or hover, but the clear buy signal later on will be the test of 1000 on ES. We may have a few interesting battles before we count the dead and feast among victors...

(Snapshots available on request)

"Waiting for Godot" (S.Beckett)

I was bearish yesterday yet wanted to give current lows a chance to hold. That's what happened for a while with the confirmation of the 875-894 resistance area, to then see the negative tone resuming strongly, to the point that whether one wants or not, the market is VERY likely to go lower still... Maybe another 15% drop by year end (!) The good thing is that it would be at last the absolute bottom we are waiting for.
We however have Q3 GDP and a few other economic indicators coming so again we can't discard a minuscule chance of the bloodshed stopping soon.

"CAVEAT OF THE DAY": It must be said however, to those who still believe that markets will bounce and this crisis will be soon history, that they just fool themselves! Long term investors who have held tight so far and have not materialised their losses, certainly haven't lost anything as such. However returning to previous highs may take years and years ! Therefore once this painful deleveraging process is completed, it will stay that way! Even if there are TONS of (hard) cash waiting to be poured in the markets, leveraging will be limited, and there will be lots of arbitrage between sectors. The "sticking your head in the sand" ostrich behaviour is therefore certainly not recommended...

Back to our charts now for today:

ER: we're confronted to the same support level (~438-443) and again little chance it will hold. Difficult to say whether it will be a up day or a down day in the very short term, but NO significant bounce potential over a couple of days. We still aim at ~380 over the medium term.

ES:same story... short sellers may take some profit but except if Q3 GDP proves good end of the week, it will be a chaotic path to the low 700s...

EURUSD: still aiming at 1.22. Short term, MM stall level is 1.2329.

(http://en.wikipedia.org/wiki/Waiting_for_Godot)

Weekly Report on ES - Oct 27th to Oct 31st '08

Last week's upper bias quickly evaporated, but we followed it day by day so didn't fall for it.
The 1000 level is now remote and we are now more wondering wheter 875 will hold.... probably not...

This report is short: all markets are tuned the same way. Please also read the ER report below.

ES 60mins:
Lows will be tested and then... lower again probably. There is some support level around there (~843), but buyers are certainly not coming back just yet. MM levels give us a support level below 820, and then... is there an end to it...?

Daily: Same as ER
oh well, should i repeat myself... if current lows fail to hold, support is probably to be found somewhat lower... the markets could slide to the low 700s... I shall update targets during the course of the week. Let's give current lows a chance still..

Weekly: bottomless
Fib and MM converge to the low 700s, and we'll see whether there is a slight chance of a support level along the way. Please check daily updates this week.

Weeky Outlook on ER for Oct 27th to 31st '08

Dominant TF: Daily, 60mins with the weekly chart obviously a little lost in this environment.
Swings: DN-DN-DN from DN-DN-DN (no change)
Market Direction(daily): down yet again...
Options (RUT): directional if current lows break (likely)

Last week monday, we indeed reported a short term recovery attempt which failed as expected, we could therefore make a few points on the way up and then make a lot more on the way down...
More worrying maybe is to see 500 barely holding on a string, as we know that volatility has the annoying effect of stretching support levels without breaking sometimes. Hence while we penetrated it quite deep (to below 440 correctly anticipated during the course of the week), there is still a bounce potential. Do we really believe it will? I'm afraid not. Current deleveraging on many many many billion US$ worth of positions is a very very very painful adjustments. I would recommend to sit tight for now. We may however have a much better looking 2009 ahead of us.

Now, let's have a look at our charts:

EURUSD: When 1.36 broke, we knew it had to go further south and while current levels offer modest support, we will probably hit ~1.22 later on this coming week. We have an extraordinarily strong tension to release offering an amazing bounce potential but it's just not there yet. 1.22 is a MM stall level, so could be the ideal point for it. One must however always be wary of any "reading between the bars". In the short term, 1.255 could hold for a while.

ER 60mins: one way only...
Drifting should continue, probably towards friday's lows. The market resisted to the bout of panic selling on the futures markets prior to the open on friday, and this may indicate a bottom for many market participants. I should still remain cautiously short and check lower time frames where we have a target in the low 450s.

ER Daily: waiting for some support level
Same story again and again... down down and looking for a potential support... While 500 is not 'officially' broken, we have little hope and the market could well fall further to the low 400s. Technically, it can only go down but we'll give lower time frames a chance to provide clearer support informaion hence again. At this level, no hope yet, i'm afraid...

ER Weekly: again this has been a market crash.
Significance level is lower so we will not pay too much attention to MTFS and Entropy. Going down anyway... We'll therefore only look at MM and Fib levels and we certainly have convergence in the low 400s... I hesitate again about the 500 level which could be stretched to the limit and still be valid. Again, we'll have to keep this time frame as background info and follow the 60mins charts rather.

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

Let's tighten our seatbelts... but shall we soon hear the "Brace" command now...?

Crazy volatility... Daily reports prioir to this crisis used to be good enough as the techniques generally gives a market outlook about 3 to 5 bars ahead. Nowadays, one would need at least 1 or 2 intraday updates to keep up with this market chaotic behaviour.

So yesterday, we played the bounce to around 920 on ES in the first hour of regular session or so, but the recovery failed to look for support back on the 875 level. More worrying maybe is that 875 level being penetrated to below 860. Today we'll watch that level very carefully again as we may just see buyers giving up the battle...

EURUSD: as mentioned yesterday, despite being on a target level, there is indication of the US$ strengthening for technical reasons (deleveraging). Next target is just below 1.27 and will be hit sooner or later.

ER: i said yesterday that ER should stay in low levels... and we'll have the same scenario today with renewed selling to recent low just under 470. Will it hold there? Difficult to say, but we can enter another price segment and forget the "500" battle. The target would then... 453! Extreme volatility can make support/resistance levels being penetrated deep without breaking thus creating more volatility. To avoid breaking (and another free fall) we now have to release some energy and get back to the 500 area very soon, otherwise 453, here we come...

ES: As said above, we had the anticipated bounce and then down and up... and down again. If a support is not found just below 870, we could see ES fall to below 840!

Conclusion: Let's forget any recovery potential for now. The 1000 battle on ES is now a stuggle to stay above 875. And more hardship to expect if these low levels do not hold today... Again, i recommend long term investors to stay out of it, or cash in on volatility with WOTM options (WAY Out of The Money). Trading short intraday time frames is still possible if not easy (10mins max).