Market Update - Mar 26th '09

The retracement we expected came quite suddenly yet remains limited if we look at the average range on the daily chart.

ES is still blocked on the major resistance level trying to go higher and it looks like it could break it to unleash some energy to reach Fib PR2 in the high 830s in the next couple of days. Again the overall look on daily and even weekly leads us to think the bottom is behind us but a substantial retracement (750?) is in the cards still, so buyers will have a better entry point by the end of the month.

ER (TF) follows a similar path with a target in the high 430s then 446.
Retracement is also necessary here, so we'll update our scenario when we get closer to next pivot point.

( posted 1:45 AM UK )

Market update - Mar 25th '09

ER (TF) took a breather inches away from resistance level at ~437 to now retrace in the same high volatility environment.
It is now aiming for around 405 (Fib PR1) or the following one right Friday's lows. As said in previous reports, we prepared for this retracement, and are watching out for a bull pattern formation on the daily chart.

ES follows a similar path, and was actually ahead of ER, this explaining why it didn't quite reach its target. ES's rise has been stopped on strong resistance level around 812 to only retrace slightly. It should now hit a significant support level just below 800, yet, we have not the faintest indication of any substantial selling pressure, even if we can already preventively look at another strong support level in the low 780s.

We believe buyers are slowly coming back to the markets, with due consideration that it may still take a few weeks to dissipate the accumulated 'bearish' energy.

( posted 6:30 AM UK )

Market update - Mar 24th '09

ER (TF)
We indeed saw ER find support just below 400 to jump up to close to the strong resistance level. We can see a few salient levels in this area (see daily chart). Having said that, we still believe a cup & handle formation will be necessary at some point.
Today's momentum can be sustained if ER stays above 421.

ES:
Reached its target, and yet still shows some residual momentum above 812. ES is ready for a pause but could just as well try and reach the next target on the daily chart (~833). Having said that, we have to be cautious and prepare for some limited retracement.

This bull run in any case takes away from danger zone (the failed recovery scenario), so we can estimate 750 as a new support level and potential stop for those who went long early enough.

( poste 6:45 AM UK )

Weekly Report on ER - Mar 23rd to 27th '09

Similar picture here (see ES below), and clearer picture too.

ER 60 mins:
Swing quality is higher here, making chart reading a lot easier. The retracement now hit Fib PR2 in the mid to high 390s where it could bounce first. However, support on 390 and even 381 would be our natural target level.

Daily:
Same mild retracement, same pattern, so while some buying interest is now visible, we shall here as well look for a lower support level (Fib and/or MM). It is however not clear whether we will see 375 again. A number of market participants will now try and enter limit somewhere below 400.
Having said that, we have to keep the same caveat in mind that here as well, the Cup&Handle formation could fail, leading to a downward Fib pattern with a target near lows. We can't discard that scenario even if we are aiming long. A stop level near lows makes it a relatively low risk/reward trade.

Weekly:
Early signs of some weak recovery in the coming weeks. Having said that, too early to rejoice as one could also just as well hit lows again, and even lower (MM stall level is around the corner at 312). It is quite unlikely though, or at least not predictable at this juncture. Like for ES, long term risk adverse players should maybe wait a few more weeks to see selling pressure abate. Any long trade below 500 is a bargain anyway if we have a long term horizon.

( posted 6:15 AM UK )

Weekly Report on ES - Mar 23rd to 27th '09

We finally got the much anticipated pause on our indices. It is never the most exact science, but it occured more or less on stall level on the 60mins chart, concomitant to salient Fib levels as well.


ES 60 mins:
Healthy profit taking with a test of pivot level was bound to take prices to the low to mid 760s. While we're hitting support here, we could see a probable continuation to stall level in the high 750s or Fib level around 755. Obviously 750 is the ultimate test, but we cannot see at this point whether it will go that low.
Looking at price segments, 781 is a test pivot level for a trading range 16 or 32 points wide. At the moment, we are below that key level, so we could well stay in this trading range. If/when passed, ES would in absence of exogenous factors return and stay in the equivalent price segment above.

Daily:
This 2% retracement on Friday remains modest compared to the run we've had in the last 2 weeks, and justifies a yellow bar only. Momentum is still up so we can only anticipate a limited pullback to the 750s level. While we are still in "early crossover" mode (aka failed recovery mode), this is likely to turn into a cup & handle formation still. Should selling pressure increase, we already see strong Fib retracement levels on 750 and 715 and targets just below 700 (unlikely scenario).

Weekly:
Early signs of some weak recovery in the coming weeks. Having said that, too early to rejoice as one could also just as well hit lows again, and even lower (MM stall level is around the corner at 625). It is quite unlikely though, or at least not predictable at this juncture.
Passage of time and a possible bounce could just as well help dissipate the strong selling pressure we've had in the last few months.

( posted 7:30 AAM UK )

Market update - Mar 20th '09

Spot on again yesterday...

I know a few of you trade shorter time frames taking in consideration the dominant trend from this context information. All I can say is to enjoy it while it's free.
Not that i will necessarily sell it, but large projects can force me to stop this report like I already stopped posting forex information.

Anyway, let's get back to our charts:

ES is now engaged in a healthy retracement which could take it down to 750. While the channel is about broken, there is no indication of heavy selling though. In fact, to confirm our profit taking scenario, prices may even need to creep back to 781-783 to then go lower. Shorter time frames are recommended today and witching can also trick us a bit. On the daily chart, the retracement to 750 is also visible and probably anticipated but it is not confirmed at all so we might just be seeing a pause on resistance level for now. The market can indeed rest also. The weekly chart is also trying to show early signs of optimism and long term players may be looking for some good entry points.

ER (aka TF) tells us a similar story, and we would like to see 406 to hold now. Otherwise, we'll check for a support level possibly as low as 375, to here again also help long term players jump in at a good price.

( posted 7:40 AM UK on this first day of Spring )

Market update - Mar 19th '09

If we look for possible exhaustion in this recovery rally, this is maybe not quite the time yet, but we should watch out still.

ES is creeping up and hitting our short term targets day after day to now come close to strong resistance levels. We do see a stall level around 805 with energy levels possibly peaking soon (we've hit 804 now). The pattern certainly seems completed. The daily chart is obviously looking bullish but also shows a strong resistance in current price area (high 790s).
One should not read too much between the lines though. Again, the momentum is still there even if there is NO change in scenario, i.e. ES WILL have to retrace on this "early MTFS crossover".
In the short term, we'll have to watch 782 as a support in case of a pullback.

ER also has a little more room on the up side with a target on 421. Patterns are the same otherwise.

We're coming close to triple witching, so interesting end of the week ahead...

( posted 6 AM UK )

Market update - Mar 18th '09

Continuation of the rally yesterday with targets now pretty close. ES could reach the high 790s and ER (TF) is now inches away from the strong resistance on 406. Obviously, longer time frames still point for some obvious profit taking but since we still have some upward momentum, it is difficult to pinpoint exactly when and where it will happen.

We shall therefore watch carefully the 406 level for ER (and 421 should that one break, this is unlikely though). As said above, ES could still aim higher, so we'll check current highs and Fib level just below 800.

( posted 6:10 AM UK )

Market update - Mar 17th '09

ER stopped its rise almost spot on stall level just short on 400 to start retracing a bit. as mentioned before while resistance is just above 400, it is more important to see ER (aka TF) stay above 375. We realize that some profit taking will be necessary (early crossover on the daily chart and weekly chart still looking ugly).
We'll therefore watch for Fib retracement levels on 60 mins chart and lower. However while energy level is dropping, we do not anticipate more than a modest retracement, so 375 would be the ideal target. Should prices stay above 385 (minor fib level, but a level still), ER may find the necessary boost to get to the low 400s target.

ES seems to have bounced on 750, so could aim a little higher. We do have possible targets in the high 760s (hit already) and then high 790s. We know nevertheless that we have the same early crossover configuration here so a retracement is due. Bars are still blue, so we'll go with the flow until momentum is exhausted.

( posted 7:20 AM UK )

Weekly Report on ER - Mar 16th to 20th '09

This report adds to the ES report below, to which ER (TF) is largely correlated.

60mins:
ER reached Fib target in the low 390s and has little energy left here as well although it may try and reach stall level just short of 400 or even the strong resistance level on 406. ER has recently been lagging ES a bit, and both symbols should try and settle on their respective targets, hence we could see creep a little higher still before retracing. It would however make sense to see ER gather strength later on near 375.

Daily:
Same "early recovery" mode on MTFS here indicates some likely instability while comforting a turnaround even if it is bumpy. After all ER reached the 346 Fib target to then bounce to Fib retracement level on low 390s. As bars are blue (like on the 60mins chart) we have to assume that ER will try and aim higher before retracing, and here again, 375 would be a good support for a change in trend later on.

Weekly:
This chart tones down any undue optimism here again. We need time to dissipate the accumulated selling pressure and we also need to see a strong support level level holding, otherwise ER will resume its course to 312. or even lower.

We shall assume a change in trend is slowly taking place, so the same recommendation is valid to either wait a little longer to pick a good entry level. Obviously shorter term players would be long already with stops a little lower than recent lows as mentioned in previous reports (2 weeks ago already). More conservative investors are likely to first wait for 500 (salient Fib/MM level) to be passed and tested for support.

( posted 7:50 UK )

Weekly Report on ES - Mar 16th to 20th '09

We've had a good looking week last week, with a bounce on the 680s taking ES all the way up to 750 by Friday. This is a strong resistance level, so let's see what our charts tell us for the forthcoming days. As a reminder though, our charts are based on daily charts, and generally have a 2 to 3 day visibility with the 60mins chart providing us with more accurate entry/exit points and the weekly chart providing context. In addition, we all know that volatility tends to act as a "time compressor" hence requiring us to update our scenario more frequently.


60mins:
ES is now sitting on the 750 level, quite overbought with little energy to take prices much higher. One could therefore anticipate some retracement even if it is not quite visible yet. Since we always try to avoid reading more than our charts tell us, we will assume that ES will try and breakout on the upside after testing 750 for support. Energy levels being low now, We would probably need some exogenous factor to leave this area. Should this not happen within a day or two, ES will see some profit taking to the low to mid 720s.

Daily:
We seem to be in recovery mode and ES could even reach a Fib retracement level into the high 760s or even close to 800. We must however realize that MTFS is in "early recovery" mode, which is highly unstable, hence a retracement down is necessary to then provide energy to take ES higher.
We must also take into consideration triple witching this coming week.

Weekly:
Weekly outlook is still very bearish and this should remind us to avoid excessive optimism still. While the fall may stop ahead of the expected 625 stall level, we are likely to see prices below 700 again.


Long term players shall therefore refrain from turning bullish too quickly. It is recommended to trade lower time frames or stay on the side line for the time being until all time frames are in synch. Having said that, it is clear that we start seeing bullish signs and there is a LOT of cash out there waiting to move back into equities, so it is more a matter of timing to pick to best entry levels now.

( posted Monday 7:30 AM UK )

Market update - Mar 13th '09

Nice run yesterday, obviously easier to follow intraday. ES only slowed down to ~710 to then get a boost to the major 750 resistance level.
The bounce was easier to predict on ER (aka TF), largely correlated anyway, which was already on a salient Fib level. It then passed 375 to rather settle for the Fib PR1 around 392.

Now while both symbols are overbought in the short term, they should remain in higher territory. ER could need to test 375 as a support to confirm this new price segment. As mentioned yesterday, even on this rather slow time frames, a long entry is always worth taking, even if we know this is still a contrarian trade (weekly chart not looking good). Any long trade on ER would have a stop around 355, likewise 705 for ES.
Retracement on ES should be limited anyway, as even tick charts now give the bottom of the new price segment (i.e. 719) as a very strong support level.

NB: The daily chart does not indicate a smooth rally. On the contrary, an early MTFS crossover is generally indicative of a bumpy change in trend with a Cup&Handle formation, double bottom, or even a failed recovery in the worst case scenarios.

More details this weekend on the weekly report.

( posted 5:40 AM UK )