A gap up this morning puts the ES close to the upper regions of the current consolidation channel. Despite rising input costs, unrest in the MENA region, a slowdown in China, Europe's sovereign debt crisis and the earthquake in Northern Japan, the market remains close to its highest levels since 2008.
The previous Gaps Up from April 1st, 4th and 6th each filled their respective gaps before climbing back up within the consolidation range. Until the market proves otherwise, I will short into resistance at the upper part of the range and and buy the support at the lower part of the range. I will not defend these positions as a move outside of the consolidation will likely be followed by a continuation in the direction of the break-out. If it happens to the downside, it should be on heavier volume than we have seen of late, if it happens to the up-side, it will likely be on low volume.
Levels to watch today on the ES:
Resistance above at: 1336-1337, 1339-1340
Support below at: 1331-1332, 1326-1327, 1323-1324
Friday, April 8, 2011
Market Remains Range-Bound Even With News of Another Strong Quake in Japan
Nothing has changed in terms of the market finding a direction. Even with a spike in volume yesterday morning following the news of another 7.1 earthquake in Japan, the ES couldn't break through the lower consolidation range support.
ES 60 Min Chart Showing Six Day Consolidation Range
I will await a breakout that results in a daily close above the upper consolidation channel or a breakdown that sees a daily close below the lower consolidation channel before gaining confidence in a new directional market move. Trading action in the day that follows will need to see a continuation in the direction of the break-out to confirm the move. If ES sees a confirmed move to the upside, I will look to buy a retracement back into the prior resistance of the upper consolidation trend line. I will do the opposite in the case of a confirmed break below the lower consolidation range.
In either case, I expect choppy markets and at least another round of volatility before a climb to new highs can begin. If markets sell-off again, it will provide a great opportunity to enter swing long positions in US equities.
ES 60 Min Chart Showing Six Day Consolidation Range
I will await a breakout that results in a daily close above the upper consolidation channel or a breakdown that sees a daily close below the lower consolidation channel before gaining confidence in a new directional market move. Trading action in the day that follows will need to see a continuation in the direction of the break-out to confirm the move. If ES sees a confirmed move to the upside, I will look to buy a retracement back into the prior resistance of the upper consolidation trend line. I will do the opposite in the case of a confirmed break below the lower consolidation range.
In either case, I expect choppy markets and at least another round of volatility before a climb to new highs can begin. If markets sell-off again, it will provide a great opportunity to enter swing long positions in US equities.
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