Markets Continue Their Unabated Rise

Markets gapping up this morning. The rebound since the March 16th bottom has been quite impressive, but it is important to pay attention to the low volume that has characterized it. While the longer-term direction may still be up, it will surprise me if the climb continues without a hick-up.

The ES is hitting its final level of resistance this morning. See chart below:

I expect a reversal off this level (the red dashed up-trend line). We may consolidate first, but markets are due for some selling since the unabated move up off the March 16th lows. If the markets don't pause at this final resistance level, that would be surprisingly bullish.

Levels to watch today on the ES:
Resistance above at 1323-1325, 1329-1330
Support below at: 1316-1317, 1310-1311, 1304-1305

Market Consolidating... Which Way Does it Break From Here?

Overall bias remains neutral. I like buying support and selling resistance.

Levels to watch today on the ES:
Resistance above at 1309.50-1310.50, 1316-1317
Support below at: 1300-1301, 1294.50-1295.50, 1289-1290

A confirmed move above 1317 on ES would be very bullish and I would consider changing my overall bias to bullish if that happens.

European markets are currently mixed with the German DAX leading the way lower at -0.5%
Japanese markets saw some volatility as the NIKKEI dropped 1.7% before recovering most of those losses as there was talk of Nationalization of the Fukushima Nuclear plant as well as growing concerns over radiation contamination.

Consumer confidence data due out at 10:00am EST

Markets are Asleep, Sorry if You Traded Them Yesterday

I took the day off yesterday, not because I knew the markets would be dull, boring or dead, but because I simply had other obligations. In any case, looking at the current market action and price, reading the technicals of the charts and considering the fundamentals of the economy, I have come to the following conclusion regarding what will happen next; I have concluded that I have absolutely no edge in predicting the next direction in the market (At least in the short-term. My longer term outlook is that US equities will push on to make higher highs). We are in a state of limbo right now. Since breaking above what I termed the critical 1304-1305 level, the action that switched my overall bias to neutral, the market has done absolutely nothing and it seems like nobody has really traded it aside from the HFT Algos. Luckily for the machines, they never get bored.

What we have become used to in the past, especially in the last two years, is that markets have generally crept upwards when there was low trading volume. The supplemental liquidity that the HFT Algos provide almost always churned the market up in low volume action (or inaction). This has not been the case in the last two days. Markets haven't exactly sold off, but they haven't drifted up either.

Though I have no intention of taking a long or a short position here where the ES is trading now (1305 as I write this), I am prepared to act depending on which way this market moves from here. Below I have outlined a couple of possible scenarios and how I will trade them.

At this point, if the market is going to continue higher, it will most likely see a dip first. If we do dip down and volume doesn't intensify, I will be looking to buy the dip. There are a couple of support price points that I like on the ES.
1) 1293-1294.
2) 1289-1290.

If the market continues lower from there, the next support would come in at 1283.50 to 1284.50. I will consider a long here as well, but if the ES trades this low, it could signal further weakness. I would consider taking profits at 5 points if I got five points. In fact, as long as I have a neutral stance in the market, I look to take profits when I get them as I don't have any signal that there is trending action. This is what being neutral means. Expect choppy market action until a new trend emerges.

If support holds and ES reverses up from 1300-1301, I would look to enter a short position at
1) 1310-1311.
and/or
2) 1319-1320. Yes I will consider a short here, but will be cautious as this price point would be after a breakout above the previous consolidation high of 1315 on the ES and could indicate a continuation higher.

As long as I remain neutral, I like buying support and selling resistance. I also don't mind staying out of the market when I don't feel like I have an edge. We could see a lot of confusing and choppy action for a little while. If you do trade in the chop, often times it is wise to increase your tolerance for heat. If you don't respond well to taking heat when a trade goes against you, sometimes it is best to stay on the sidelines until a new trend emerges...

As soon as I see more conclusive market indicators, I will comment on them.

Markets Continue to Move Up

Markets continue to climb since bouncing off the lows on Wednesday of last week. ES is now trading above what I called "the critical 1304-1305 level". Because of this I have switched my overall market bias from bearish to neutral and consider that the lows of this correction are likely in. At the same time, the ES will need to remain above 1300 today to confirm this. There remains significant resistance overhead.

Levels to watch today on the ES:
Resistance above at 1312-1313, 1317-1318
Support below at 1305-1306, 1294-1295, 1289-1290

In the News:

GDP numbers were released this morning coming in at 3.1%, in-line with expectations.

In Japan, reports suggest that one of the Fukushima reactor cores may be cracked and leaking radiation, and the recommended evacuation zone was widened.

Debt crisis in Europe making headlines again. Standard & Poors downgraded Portugal two notches to BBB and reports show that Portugal may need a $99-113 billion dollar bailout.

Today's Bottom Touches 1279... Now What on the ES?

We didn't quite reach my 1276 target long entry today, too bad, would have been a very low risk trade. What I'm speculating now moving forward is that ES will move up and test the 1299-1300 resistance (maybe tomorrow). I will look to get short there, but won't defend that position as there is a good possibility ES will continue higher to 1304-1305. If that target is reached, I will again look to get short.

That is the key level I am looking at right now. If ES confirms a move above 1304, I will have to switch to a neutral (which could change quickly to a long) overall bias and will consider that the correction may (I repeat "may") be officially over...

That's what I am looking at as of this moment here on Wednesday afternoon. We'll see...

Follow-up on New Oil Spill in the Gulf

I mentioned on Monday's Post that there was a possible second oil spill in the Gulf. Well, the source of the oil spill has been confirmed and no it was not silt from the Mississippi River, it was oil.

"Houston-based oil company Anglo-Suisse Offshore Partners, LLC accepted responsibility for at least part of the reported oil impact.
The company was plugging an abandoned well between last Friday and Tuesday of this week"

They have been plugging the well since last Friday?? I like the fact that it has only just been confirmed in the news today! In reality, I haven't even seen it mentioned in any of the major news media outlets...

News is sparse, but it is something to keep an eye on. If it develops into a bigger story it could have an impact on the markets.

Markets Show Some Weakness

Yesterday was a boring consolidation day, which I had expected, but there were some signs of weakness as the ES made lower highs throughout the day. Last night the ES broke down through support at 1287-1288. So it looks like we could see some further down side today.

Japan's Nikkei fell 1.7% overnight. There seems to be rekindled concerns regarding the restoration of damaged nuclear facilities. Estimates from the country peg the cost of damage from the earthquakes and tsunami at 25 trillion yen.

I am biased to the downside today, though I don't expect a big push lower yet. If we do trade down today, I would expect support to hold in the mid 1270s and would be a buyer there in the short-term. We may see another minor push up before getting the continued down-side momentum that I expect. As usual, will watch for any breaking news that could add volatility back into the market and put further pressure to the downside.

Levels to watch today on the ES:
Resistance above at: 1293-1294
Support Below at: 1281-1282, 1275-1276

Will the Volatility Come Back?

The ES saw its lightest trading volume in the past month yesterday and aside from the gap up and brief push higher in the first hour, action was limited.

The markets have momentum to the upside following three straight positive trading days off the lows. However, there is significant resistance overhead. Without an increase in volume though, we could see a continued move up. I'm really not expecting much today, but we'll see if any breaking stories inspire an increase in trading activity.

My bias is neutral today. I will consider shorts into resistance and longs into support. The key indicator for me to gain confidence in the short side will be a spike in volume.

Levels to watch today on the ES:
Resistance above at: 1296-1297, 1300.50-1301.50, 1309-1310
Support Below at: 1288-1289, 1280-1282, 1274-1275

Latest Take on the Market

Overall I continue to maintain a bearish outlook. As the markets move back up, I look at higher prices as opportunities to get short. I believe we have yet to see lower lows. In speculative terms, I am looking for a bottom on the ES between 1180 and 1225. A daily close on the ES above 1300 would make me reconsider my outlook.

This morning however, US markets are gapping up following positive gains abroad. The nuclear situation in Japan appears to have stabilized, and western powers have launched attacks across the coast of Libya to take control of Libyan airspace.

Though we are now seeing gains for the 3d straight day since moving down 100 points off the February highs on the ES, there remains significant overhead resistance and the news around the world certainly isn't peachy.

Below I'll mention a few concerns that support my negative bias.

Despite the nuclear situation being under control in Japan, there is new smoke rising from reactor #2 and the critical reactor #3. Spokesmen from the Fukushima Power Complex said they did not know the cause. This is still a dangerous situation. Any new news that is bad news could influence another wave of selling

The downturn in Japan's economy following the earthquake will be severe. As the 3d largest economy in the world, its effects will be felt globally.

Protests and violence in Yemen are escalating and senior officers are defecting to support the opposition that wants to oust Yemen leader Saleh. The United States supports Saleh as he is a partner in the war against al-Queda.

It has yet to be confirmed, but it appears there could be another oil spill in the Gulf of Mexico. A 100x10 mile oil slick appeared over the weekend 30 miles SE of the Mississippi River delta. This could be one of three things; 1] A new oil spill (possibly from the Matterhorn SeaStar oil rig, owned by W&T Offshore, Inc), or 2] a new leak from the plugged Deepwater Horizon well, or 3] what the coast guard has recently said is most likely a plume of silt from a dredging operation on the Mississippi River.

The Coast Guard should have a more definitive report soon.

Gaddafi not backing down in Libya:
Since western powers have begun air strikes to enforce a no-fly zone over Libya, Gaddafi told Libyan state TV that the attacks "amounted to terrorism" and that Libyans would be armed to go out and fight in his name. Gaddafi is now reported to be using human shields in an attempt to deter opposition fire.
The Arab League, one week after urging the United Nations to operate a no-fly zone on the North African state, are now criticizing the military action.


Will play this market as we see it for now, not sure if we will see a downturn or not today, but expect further downside to be in the cards in the near future.

Key levels to watch on the ES today:
Resistance above at: 1291-1294, 1297-1299
Support below at: 1285-1287, 1282-1283, 1277-1278, 1273-1274

Intervention in the Currency Markets Halts the Rapidly Rising Yen

The dollar soared 2.7% against the Japanese yen to 81.31 yen after the G-7 announced coordinated intervention in currency markets. The G-7 will buy dollars and sell yen in an effort to weaken the Yen and stimulate Japan's export economy.

My suggestion to short the Japanese Yen yesterday morning is already playing out. The YCS, an ultra-short ETF that bets against the Japanese Yen, is up almost 6% this morning.

Fundamental reasons that suggest a weaker yen is the future:

- Rebuilding efforts in Japan since the earthquake will require imports of materials. This will force the borrowing of money for reconstruction adding to national debt.
- Japanese debt is already enormous at 100% to GDP
- As Japanese production of goods takes a serious hit from factory shutdowns, Japanese exports will go down, meaning less export revenue.
- Japan continues to print money through quantitative easing.
- Similar situation occurred after the Kobe earthquake in 1995. The Yen initially rose, but eventually decreased and continued to do so for the next 3+ years.
-Technically, the Yen Chart shows a multi-decade double top and it just happens to coincide with two catastrophic earthquakes.
-The bank of Japan cannot lower interest rates to stimulate their economy, interest rates have already been at or near 0% since the mid 1990s
-Demographics in Japan show an aging population. This means less young people earning wages and paying taxes and more retirees collecting government benefits. A smaller number of workers is supporting a larger number of retirees.
-It is in the best interest of Japan to devalue the Yen in an effort increase exports. You can see they are finally beginning to succeed with the latest G-7 intervention

The Japanese Yen

I don't mention plays in the currency market often, but I must talk about the Yen. The Japanese currency made new all times highs last night and is setting up for a nice short. Also of note, is that the Yen is at a multi-decade double top. That combined with terrible fundamentals make for a low risk entry to the short side. I think there is an opportunity to sell rallies in the Yen for the next decade.

I will add additional fundamental analysis soon to support this...

Short Term Oversold Market Rallies

We have seen a nice gap up this morning after testing key support in the lower 1240s yesterday on the ES. On the second wave of the sell-off yesterday afternoon, the S&P 500 Cash Index bounced off S2 support exactly and saw a 20 point rally from there.

After making a brief new low in the GLOBEX session last night, the markets have caught a nice bid and are now testing upper resistance. I remain bearish overall as I believe there is still further downside in this market. However, as we have seen thus far, action is choppy. This bottoming process may take a little time to play out as multiple rallies and sell-offs are likely. In any case, I have not see any confirming evidence of a bottom yet and until I do, I will maintain my bearish stance.

Natural disaster in Japan and instability in North Africa/Middle East have been catalysts or excuses to begin exiting positions in an over-bought market. That, as well as anticipation of an end to QE2.

Today I like resistance at 1278-1283 and will look to get short there. A close above the 1280 level could indicate further upside potential. As long as we don't close above 1290, I will remain confident in shorting rallies into resistance.

Levels to watch today on the ES:
Resistance above at 1277-1279, 1283-1284, 1288-1289
Support below at: 1266-1268, 1259-1261, 1254-1255, 1248-1250, 1239-1241

Japan Nuclear Situation Out of Control

http://gizmodo.com/#!5782239/european-officials-japan-nuclear-situation-is-out-of-control

Market Sells on Fear, snap back rally off 1255 Support

...'after some comments about the situation in Japan from an EU energy commissioner (which were apparently made overnight) hit various newswires. The circulation of the headlines, which included quotes about the Japan situation being "out of control" and that it could be "an apocalypse", coincided with a drop in the market and uptick in volatility. However, as the comments were digested and subsequent headlines suggested that this particular person "does not have any specific extra information on the situation in Japan", things have calmed down and the market has stabilized' - Briefing.com

Neutral Start to Trading This Morning

Quick note on Japan: All of the Japanese Indexes saw nice gains following their two previous days of heavy selling. NIKKEI and TOPIX up 5.68% and 6.64% respectively. Note though that NIKKEI Futures are currently down -2%. Regarding the Fukushima Daiichi Plant, efforts to cool the nuclear reactor were put on hold as radiation levels surged, but efforts to resume cooling are expected to continue. Japan has stated that radiation levels outside the plant are stable. The story continues to develop.

Instability in the Middle East/North Africa continues as battles between government forces and rebels wage on in Libya, while in Bahrain, clashes between Shiite Muslim protesters and Sunni government forces have escalated. Bahrain has declared a three month state of emergency and amidst the unrest, has closed its stock market today. Saudi troops are on reserve as the Kingdom is worried that similar dissent from the Shiite minority in Saudi Arabia could spell trouble at home. To make matters work, Iranian president called the actions of the Bahrain government "unjustifiable and irreparable."

Data releases this morning were negative:
February PPI +1.6% vs +0.6%. Inflation levels high here at the headline level based on energy and food prices.
February Core PPI +0.2% vs +0.2%.
February Housing Starts 479K vs 575K
February Building Permits 517K vs 573K

With so much instability around the world and potential for breaking news stories that can inspire fear and panic in relation to financial markets, I continue to have an overall bearish view point on the markets. We are currently in correction mode (even with yesterday's technical rally) and until it is confirmed that the market has put in a bottom, I will be confident we will see lower lows.

I would have to reconsider my overall short bias if the ES sees a daily close back above 1300.

For today, I expect slightly less volatile trading, perhaps some minor consolidation as the markets process the recent action. I don't expect to trade above yesterday's highs. Bias for today is neutral to short.

Levels to watch today on the ES:
Resistance above at: 1277-1278, 1283-1284, 1289-1290
Support below at: 1269-1270, 1259-1261, 1254-1255

Markets Set for a Large Gap Down Amidst Global Economic Uncertainty

Given the crisis in Japan, it is important to consider how a slow down in the Japanese economy can affect the rest of the world (Japan GDP is forecast to shift from +2% to -3% since the earthquake). Japan is the third largest economy after the United States and China, so trouble in Japan has a significant effect on the rest of us. A slow down in Japan's economy will mean less use of raw materials and oil. Less demand, means lower prices. Note the drop in the price of oil futures since the quake.

Activity at many Japanese factories/businesses has ground to a halt as power outages as well as the inability of workers to find transportation to get to their job locations, have disrupted work-flow. If this disruption limits the number of mechanical and electrical parts that Japan can produce, it will reduce supply of these products and in turn drive up prices for those who import these goods. So a declining economy in Japan does not bode well for economies elsewhere. This is something to consider when factoring the odds that the current down-turn in the equities market in the United States may continue further.

Another thing to remember today, is that volatility is high, so price swings are going to be greater. We have already seen multiple 10 and 20 point moves on the ES in overnight trading. Don't expect this to change heading into trading today. Wait for trade opportunities to come to you. If you miss a trade, don't chase. This simple piece of advice is even more important to remember in the current market environment, because mistakes can be much more costly given the volatility.

Overall, I continue to be short-biased in this market, but acknowledge the potential for a rally up off this mornings gap down. We could see a pierce of the 1250 lows and then rally from there. As usual though, we'll trade it as we see it.

Key levels to watch on the ES:
Resistance above at: 1261-1263, 1269-1271, 1279-1281
Support below at: 1249-1251, 1237-1239

Japanese Markets Crash

A third explosion occurred at the No. 2 reactor of the Fukushima Dai-Ichi nuclear plant and a fire has broken out in the building housing its No. 4 reactor. Four of the complex’s six reactors have now been damaged by explosions. The result in the Japanese financial markets has been all out panic. The Nikkei plummeted 16% before trading was halted. All Japanese Indexes are currently down 10-16%. This is the steepest 2 day decline in Japan since the 1987 market crash and those losses will likely be extended.

The S&P 500 futures have also sold heavily, dipping more than 40 points. ES has found support in the lower 1250s and I expect that support to hold through the remainder of the evening session.

I continue to hold my swing short position.

I usually keep this blog strictly financial, but with the terrible situation overseas, I just want to say that my heart goes out to the people in Japan, the earthquake victims, tsunami victims and now all those that could face the threat of radiation. Sometimes the events that instigate market sell-offs cause far more pain than just the financial kind. We wish you strength, Japan, in this difficult time...

Markets Give Up Friday's Gains

US markets down close to 1% ahead of the opening bell. Japanese markets down significantly following Friday's earthquake with the TOPIX down 7.5% and the NIKKEI down 6.2%. Japan's GDP is going to suffer as a result of the economic consequences of the quake and tsunami. Initial damage estimates are up to $120 billion. Bank of Japan has printed another 17 Trillion Yen ($184 billion dollars) to inject into the markets.

Japan's Fukushima Daiichi nuclear plant suffered a second explosion overnight raising concerns of a potential nuclear meltdown. Interesting to note that solar and wind power stocks have seen a boost while Uranium stocks have slipped on the now negative perception of nuclear power.

Oil prices on the other hand, have dipped back below $100/barrel on weaker demand expectations following the quake in Japan.

The key resistance just above 1300 (ES) held on Friday and there were some nice gains to be had if you got short at the close of trading last week. I did take that trade, as discussed in the comments on Friday's post.

Markets still weak and I view the best opportunities as shorting the up-ticks/shorting the rallies as US markets have further to correct in my opinion. I continue to like the resistance at Friday's highs and expect new market lows this week. First target is 1270 or a dip into the 1260s. We'll see how the market trades at that point to determine if continued weakness will follow.

In any case, when it looks like the correction has ended, I will be looking to get swing long on the S&P.

Levels to watch today on the ES:
Resistance above at: 1298-1299, 1304-1305, 1308-1309
Support below at: 1289-1290, 1280-1281, 1270-1271

Quick Look at Intra-Day Action

There was capitulation like behavior last night in the GLOBEX session that saw the ES reverse off the 1380 level. Underlying action since has been bullish.

Key opportunity to get short as we approach 1300 on the ES. Look for resistance to hold up around 1300. Just quick note about the previous lows being broken and the expectation of continued weakness. Although we are looking very bullish intra-day, a retrace back up to 1300 is perfectly normal and as long as the move doesn't confirm higher, the weakness is still in play and we should be able to expect further lows. I will be looking for opportunities to get short between 1299-1302. Key is to wait for resistance to become apparent in that range. Then it is a safe entry short. Just don't defend the position if continued buying strength comes in after.

You could consider getting short sooner, but there is the potential to take more heat than is preferable here at the 1297-1298 price level...

Away From My Trading Desk

I'm finally getting on the internet, unfortunately from a laptop with a little screen, in any case, certainly a negative start to the day. Note: all levels I have been mentioning previously were for the March E-mini S&P Contract. Rollover happened last night, and the June (M) contract is trading 5 points lower than the March (H) contract. So far this morning a key support level has held. As I said before, If the lows from 2/24 are tested (1287.50 on the ESM11 June contract), they will most likely not hold. For now waiting to see if the current lows of the day break down, which should then bring us down to 1285-1286 (ES June). Once that breaks it should begin the move down to the low 1270s on the June Contract (1275-1277 on the March contract). As I have said previously, I expect this to happen, we just need to see some new lows come in here to know we are on the way...

Markets More or Less Flat Ahead of the Opening Bell

Not expecting too much today, Asian markets up slightly, European markets mixed, but more or less flat. Support held overnight on the ES and US markets set to open up flat. Price of oil seems stable and no major news to talk about.

I'm neutral to bullish today and expect to see the ES trade as high as 1330.
I like buying the dips today. If ES trades lower than 1309, that would be bearish.
As usual news out of the middle east can always create volatility and anything that will escalate oil prices will likely send the market lower.

Levels to watch today on the ES:
Resistance above at: 1326-1327, 1330-1332
Support Below at: 1316-1317, 1310-1312

Will Market See Further Selling Today?

Futures sold off after making a bid overnight following action in Europe as the STOXX, DAX and FTSE are all in negative territory after beginning their sessions with gains. Price of oil and unrest in Middle East/North Africa continue to keep worldwide markets uncertain. News of protests in Kuwait, the 5th largest oil producer in the world, is something to take note of.

US markets set to open neutral.

I continue to expect a market decline, but previous lows need to be taken out first. It begins with breaking 1300 on the ES. If the low from the 24th of February is tested (1292.50 on the ES), I don't expect it to hold. But for now I am weary of the potential for choppy markets.

Levels to watch today on the ES:
Resistance above at: 1314-1315, 1318-1320, 1326-1327
Support Below at: 1301-1302, 1296-1298, 1294-1295, 1290

If ES breaks 1290, the next target will be 1274-1277

Crude, Gold and Silver All At New Highs as Market Faces Continued Stress

Oil has continued higher since making new highs on Friday. Gold and Silver also rallying as potential flights to safety amidst rising oil prices and global turmoil. Battles in Libya continue to rage between government forces and rebels suggesting that unrest in Middle East/North Africa (MENA) is far from over.

Surprisingly, US markets are not lower this morning after crude oil futures traded almost as high as $107 in the last hour.

My bias is to the short-side today and I expect to see the market make new lows soon. That being said, technical levels continue to show support underneath current market prices. The overall up-trend has not yet confirmed a break-down. For that reason, I can't be overly confident on the short-side just yet and will have to continue to trade what I see. For the short-side to play out, the ES needs to see another move below 1300 and if the lows (1293-1294 ES) are tested again, I don't expect them to hold.

I favor shorting the up-ticks into resistance as of now.

Levels to watch today on the ES:
Resistance above at: 1326-1327, 1333-1334
Support Below at: 1312-1314, 1304-1305, 1298-1299, 1293-1294, 1290, 1285-1286

Markets See Some Selling After Unemployment Report

Crude oil is back over $103 and Gold is seeing a bid, but US futures didn't see any inverse reaction until after the unemployment report. The ES saw an initial bid up to 1334.50 following the mediocre report, but then quickly sold off 7 points. ES is now trading underneath its overnight support.

In the news this morning there have been reports of intensifying fighting in Libya. Protests in Saudi Arabia demand the release of Shiite prisoners being held unjustly, and there was mention of a bombing at a Yemen anti-government protest.

I like shorting the up-ticks today as long as the the ES trades underneath 1333-1335 (EDIT AFTER INITIAL POST: I only like shorting the up-ticks if we get continued selling after the opening bell to indicate weakness). If volume dies off after the morning, selling may not have the chance to come in and markets could float back up. If selling does not come in today and we trade in a tight consolidation range, it will be a bullish sign for the markets looking forward.

Levels to watch today on the ES:
Resistance above at 1329-1330, 1334-1335, 1340, 1343
Support below at 1324-1325, 1317-1318, 1313-1314, 1304-1305

Buying Propels Markets Upward in the Overnight Session

Markets strong to open up today's session.

1) Initial Jobless claims reported at 368,000 versus consensus estimates of 395,000. Continuing claims also fell to 3.77 million from 3.83 million.

2) Oil is lower following news that Hugo Chavez has proposed a plan that would resolve the conflict between Libya's Gaddafi and the anti-government forces. The plan, involving a commission from Latin America, Europe and the Middle East is questionable, but the sell-off in crude cannot be argued.

Even with the bullish sentiment, my bias is neutral at the moment. The upward price action doesn't seem much more than noise to me. If buying continues after the opening bell, I don't think the ES will trade higher than 1326-1327 today. But more importantly, in terms of recent market weakness, I will be watching to see if the overnight momentum is rejected in the early going. I want to see if market participants view this move up as a selling opportunity. A gap fill will provide confidence that the market remains weak.

Levels to watch on the ES today:
Resistance above at 1321-1322, 1326-1327
Support below at 1313-1314, 1307-1308, 1302-1303

Markets Weak, Oil Remains High

Yesterday's downward price action suggested that more weakness is in store for the US markets. The only technical sign needed to confirm the weakness is a lower low, a move that would need to see the ES trade below 1293.50.

Asian markets, NIKKEI, TOPIX and HANG SENG all down big on the heels of the sell-off yesterday in the US. European markets, FTSE, DAX and STOXX also currently trading lower.

I won't be surprised to see the market consolidate between 1296 and 1312 today. We may have to wait another day to see a follow-through to the downside. I like shorts off the 1310-1312 today and/or selling the up-ticks into resistance. I expect the ES to make its way down to 1277-1280 this week. That should be a short-term buying opportunity.

Levels to watch today on the ES:
Resistance Above at 1305-1306, 1310-1312, 1319-1320
Support Below at 1293-1295, 1289-1290, 1285-1286, 1277-1278

Up and Down Overnight Session on Continued Unrest in the Middle East

US futures continued up last night as the ES traded as high as 1336.50. Rumors surfaced, however, that Saudi tanks were sent into Bahrain to put a damper on anti-government protests. Oil futures surged as a result influencing European markets and US Futures to give up some of their earlier gains.

As usual situations in the Middle-East continue to be the catalyst for Volatility. Bahrain is of particular interest to Saudi Arabia as its neighbor to the East is experiencing significant unrest from the Shiite opposition whose goal is to oust Bahrain's prime minister of the past 40 years. It is obvious that Saudi Arabia does not want its own Shiite population to be influenced to carry on similar anti-government protests.

ISM Manufacturing Index data at 10:00am EST, Ben Bernanke will speak in front of the US senate beginning at 10:00am EST as well and could provide more fuel to influence market action.

I am currently neutral and will consider buying off support and selling off resistance. Shorts still provide faster downside potential than longs provide upside potential. I don't see the ES breaking the 1340-1343 highs anytime soon, so though I am neutral at the moment, in the bigger picture my bias is to the downside. Watch for volatility inspiring news out of Middle East/North Africa (MENA).

Levels to watch today on the ES:
Resistance above at: 1334-1335, 1339-1340, 1343
Support below at: 1327-1328, 1319-1320, 1313-1314