Markets looking strong after yesterday's rally to close the day. Not expecting too much excitement this morning ahead of the Fed minutes (released at 2:15pm EST). 1295-1296 (ES) should hold ahead of the announcement. Some volatility will likely follow leading to new highs. That is the time I will look for a potential swing short entry. Assuming we do see new highs in the late afternoon, I will be looking to get short as soon as there appears to be an excess in supply (i.e. more sellers than buyers). If the ES makes new highs into the close, I will look for the potential high to be established overnight in the GLOBEX session.
A pierce of the 1300 level (ES) is a likely scenario and as I have said in the past, I will confidently short the market at that level. This subsequent move down should be good for a minimum of 50 points, perhaps 10% at the most. Looking ahead, I like long entries in the 1220s (ES) and will expect the bull market to continue on from there.
What would make me change my mind about this short bias? Two things. 1) If the Fed did something outrageous, like announce it will now bail out California, Illinois and New York with QE3. But that is not going to happen, not today anyway. 2) If we get two consecutive daily closes over 1300 on the ES. I will likely abandon my shorts in that case as well, otherwise, I am a confident seller.
Levels to watch today on the ES:
Resistance above at 1295-1296, 1300, 1305-1306
Support below at 1287-1288, 1283-1284, 1277-1278, 1273-1274
Wednesday, January 26, 2011
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