Market Higher Ahead of Final FOMC Announcement of the Year

Part of the recent run-up in stock market price is likely due to speculation that the Fed will increase its asset purchase program by an additional $45 billion to compensate for the termination of Operation Twist at the end of the year. Operation Twist will not be extended because the Fed is running low on short-term securities to sell. So to continue to buy longer term maturities in the same capacity, the Fed will need to do so through additional quantitative easing.

This will bring total outright purchases by the Fed to $85 billion/month. This is an additional $45 billion on top the current open-ended purchases of $40 billion (from QE3 announced 10/24). Anything less than this will be perceived as a disappointment and the market will likely sell-off as a result. Expect volatility following the announcement at 12:30pm EST as well as Bernanke's press conference later in the afternoon at 2:15pm EST.

The Fed could add $2.2 trillion or more to its balance sheet over the next two years. This will continue to keep interest rates low and to maintain an artificial level of support underneath the financial markets looking forward.

Without surprise monetary easing measures by the Fed, or something larger than an additional $45 billion/month in asset purchases, I expect markets to sell off following the Announcement. If we do get the sell-off, it will setup a nice buying opportunity next week. We really haven't seen any selling in this market since the ES E-mini S&P 500 Futures bottomed at 1340.25 on November 16th. This market is due for a little bit of fear before the end of the year, it is due for at least a small pullback. That pullback, if we get it, will create the first good dip-buying opportunity since mid-November to position yourself long into the end of the year.

Some levels to watch on the ES (Z December Contract):

Resistance above at 1435-1436, 1439-1440, 1450-1451, 1455-1456

Support below at 1419-1420, 1411-1412, 1401-1402

Market Sells Off Key Resistance

The ES reached a key resistance level yesterday morning between 1423 and 1425 and was rejected swiftly. The remainder of the day was dominated by selling as the ES dropped more than 20 points. The ISM Manufacturing Index suggested business is contracting following a disappointing reading of 49.5, the lowest level since July of 2009. Employment is especially weak in this report, showing the first monthly contraction in more than three years. At the same time, Fiscal Cliff talks are not making any progress leaving room for sellers to enter the market.

I expect choppy action in the markets over the next two weeks leading up to the December 12th FOMC meeting and what should be resolution on the Fiscal Cliff scenario two days later. If we see any significant sell-off during this period, it will be a buying opportunity and I like buying dips into the end of the year. A sell-off into the 1370s ES is not out of the question. Uncertainty is high so I am not looking to hold any positions for long. Most of my trades will be day trades for now.

Levels to Watch on the ES (Z December contract):
Resistance:  1410.50-1411.50, 1416-1418, 1423-1425
Support:  1403-1404, 1399-1401, 1393-1394

Strength Argues for a Bullish View Going Forward

The market did pull back as expected and the ES saw a move down and through my first level of support yesterday. Again positive remarks from Boehner and Obama regarding the fiscal cliff were enough to put a bid back into the market. Buying pressure was intense for the second time in a little over a week signaling that this latest bullish move is likely here to stay.

Markets are gapping up this morning with the ES trading up into resistance approaching 1418. I had said I would love shorts in this area in my previous post, but since the market has already pulled back, this is no longer the case. I do like shorts up here, but only as day trades now. I will look for a pullback to at least 1409-1410 and potentially as low as 1400 or at least to Gap Fill at 1406-1407. Need to see how the market closes today to know more. Expect support to hold on any pullbacks. If buyers step in and drive price back up or if price can remain elevated into the close, this will signal confirmation for bullish momentum and I will like buying dips going forward. This is what I expect to happen.

Levels to watch today on the ES (Z December Contract):
Resistance above at: 1416-1418, 1423-1425
Support below at: 1408.50-1409.50, 1403-1404, 1399-1400

Rally Off Lows Now Hitting Resistance

As I said would happen in my previous post, markets rallied right into the Thanksgiving holiday. More buying  pushed price even higher during Friday's shortened trading session on low volume. This morning it looks like Markets will open a little lower, having given up Friday's end-of-session gains. 

I would be comfortable selling any rallies from here (ES currently trading at 1400).

Resistance above on the ES (Z December Contract) at: 1402-1403, 1406-1407, 1413-1418.

If the ES does continue higher and trades as high as 1418 without pulling back first, consider it a gift-wrapped short opportunity.

This market will pull back, and as cliche as it sounds, continued talks regarding the Fiscal Cliff should provide the catalyst. 

Support below on the ES at: 1393-1394, 1387-1388, 1375-1377, 1365-1367.

The next best buying opportunity will be a move back down to the mid 1360s. From there look for the rally to continue into the end of the year. That's what I'm looking at for now, we'll see what the price action tells us from here...

Short-Term Bottom In

Friday's action saw massive buying come into the market following another lower low on the ES. Oversold conditions begged for an excuse to rally and optimistic remarks from Obama and Boehner regarding the fiscal cliff provided the catalyst. The ES rallied almost 19 points in just over an hour and finished the day back over 1360. I Expect buying to continue as we head into this week and the Thanksgiving holiday. If you're not already long, I'd be very confident in buying dips from here.

For some targets to the upside lets look at some key resistance levels.

Resistance on the ES (Z December Contract):

1367-1370, 1386-1388, 1394-1397.

Consider taking profits on long entries at any of these resistance levels. Even though I am bullish now in the short-term, I will consider shorts again as the ES approaches 1400.

That's what I am looking at right now, lets see how the market opens...

Friday's Rally Gets Smacked Back

Prior support in the mid 1380s (ES Z Dec Contract) proved to be strong enough resistance to stop a momentous rally on Friday. Strong enough in fact, to smack the market back down with conviction, faster than it rallied earlier.

So what next?

The action on Monday (a limited volume holiday) was meaningless consolidation. I continue to favor the upside in the short-term as long as the 1372-1373 support (which happens to be the 61.8% retrace of Friday's rally) holds. Its probably a 50/50 proposition right now. I prefer long entries though, as the risk to reward ratio is favorable to the upside. But given the weak market, longs have to be taken with caution. I wouldn't defend any moves below 1372. If the "rally" from here is to play out, the ES still needs to break above the mid 1380s resistance. That will provide the potential to run back up above 1400 and possibly to 1405-1410. If the ES does reach that price range, I will look for short entries from there. Overall, markets remain in a down-trend and we must await further price action to signal something different.

Reversal Time

This morning the ES made a new low 100+ points off the September and October double-top. Heavy buying momentum has followed. I am now biased to the up-side in the short term. Next target is 1402-1405 ES. We may not see another dip to buy today...

What to do Following the Largest Down Day Since November 2011

First of all I must mention that yesterday's post turned out to be remarkably accurate in terms of price action during and after the election. The ES moved 47+ points from the lower 1430s resistance level to my downside target in the mid 1380s. So what next?

The ES now sits above support at 1385-1386. This is a very important level. Support needs to hold here or we may see a considerable leg down looking forward.

Too early to tell what will happen, but odds are that we see at least a short term bounce from the 1390 area. If you are long, be careful defending anything below 1385-1386.

In terms of buying today's decline, good places to take profits are at the following resistance levels:
1400-1401, 1406-1407 and 1411-1413.

Any long entries will be day or short term trades for now as the market is currently trending lower. I will need to see consecutive closes above the 1413-1420 area before getting optimistic about the long side again. That being said, I do think the market is in the process of making a bottom. We'll need price action to confirm this before knowing for sure.

So key levels to watch right now are 1385-1386 as support and 1411-1413 as resistance on the ES (Z December contract 2012).

If the 1385 level is broken it is not the end of the world, but we will need to see buying come in to prevent the market from making consecutive closes lower.

The coming days will be telling.

What to Expect Following the Election

We got the move up to 1430 ES that I talked about in my last post and sellers came in and sold those gains as I expected. Key resistance remains at 1430.  I will be looking for a move up to test last week's high of 1431.50 and possibly break it. That should create another good shorting opportunity. Assuming resistance does hold in the lower 1430s, I will be looking for a  move lower regardless of who wins the election. Initial target to the downside is the mid 1380s. From there I will be looking for the market to find support and eventually form a pivot low that can be bought and held into the end of this year. We'll have to wait and see how price action behaves over time following the election before I get into any more detail there.

The markets should sell off regardless of who wins the election. Markets are already at four year highs and are showing signs of weakness following the announcement of QE3. In the case of a Romney win, assumptions of a change in Federal Reserve monetary policy will cause the markets to sell. In the case of an Obama victory, fear of tax hikes will cause the markets to sell. There is also a high possibility that the election will be close. Any contention or litigation questioning the legitimacy of the winner will cause more uncertainty in the markets and again will influence selling. But in both cases I believe that selling will likely be short lived. We remain in a loose monetary policy environment that favors low interest rates, inflation and devaluation of the US dollar. This is not going to change regardless of a Democrat or Republican victory. The Fiscal Cliff will be less of an event than many expect and markets should  resume their risk on mentality.

For today, look for a range bound market with potential to fade moves in either direction. I am biased to the upside as the election results come in, but like I said, resistance is strong at 1430 ES. A move up to or slightly above this level should provide a great shorting opportunity. I will be looking for the market to sell off below 1400 from there or following the election. First target to the downside is 1385-1388. Good luck and get out there and vote if you are eligible... 

Sellers Drive Market But Long Opportunities Remain

Sellers control the market as the short-term trend continues lower. The ES has now traded below my 1420 key support level four days in a row with each of those days seeing a slightly lower low. At the same time, sellers have not been able to hold the ES below 1400. The push to the low of 1394.50 on the ES last night came following the Apple earnings miss. Apple, as well as the market, have held their own so far indicating that earnings expectations have already been priced in.

The ES is giving some signals that it is in the process of reversing back to the upside as support is holding steady at 1400 ES so far. I expect a move back up to 1427-1433 in the near term. This is key resistance and I wouldn't be surprised to see another push lower from there. The short-term trend remains down and I would prefer to enter a swing long position somewhere between 1375 and 1385 on the ES. For me to favor the long side again, the ES will need to see consecutive closes back above the 1430 level. Until that happens I am neutral and will look to trade a range between 1380 and 1433. As long as the market doesn't break down below 1370 and/or the ES confirms back above 1430, I will be favoring the long side again.

Market Showing Strength and Could be Signaling Start of Next Leg Up

Although its been more than a week since my last post, my outlook has not changed, I remain bullish overall. We saw slightly lower lows into the end of last week, but the markets have since found support and are moving higher. If today's gap up holds and the ES closes higher, it will mark the largest two day move since Bernanke announced the open-ended purchase of mortgage backed securities over a month ago and would mark an inflection point off of the lower trend support of the up-channel dating back to the June 4th lows. This could be a signal that the next leg up has begun, a move that should bring the ES to at least 1500. We would need to see consecutive daily closes below 1420 on the ES to make me reconsider my long bias. For now, I continue to favor buying the dips.

Levels to watch today on the ES (Z Dec Contract):
Resistance above at: 1444-1446, 1449.50-1450.50, 1454-1455
Support below at: 1438.50-1439.50, 1434-1435, 1430-1431

Market Consolidates Lower Setting Up Better Long Opportunities

I remain biased to the long-side even as the market is moving slightly lower. There has not yet been a sign that the current action has necessarily bottomed, but in an overall bullish market, you don't always get a definitive reversal signal during phases of downward consolidation. For that reason, I continue to like long entries in the mid 1430s. Of course if you are a shorter-term trader, you have to consider the good possibility of getting a better long entry at a lower price. But the reason it remains a good long opportunity (especially for swing traders), is that I expect higher highs to be on the horizon before we see any significant correction.

If I had to specify the reason the current weakness has not been met with more buying enthusiasm, it would be because the market was already at multi-year highs when QE3 was announced, there was already expectation of QE priced in, the market is already feeling pressure to price in an Obama second term (which is perceived negatively because of the belief that it would mean a hike in taxes which would limit growth and  be bad for GDP), as well as on-going concerns over Spanish debt yields and Europe in general.

As I said, I remain biased to the long side overall.
Some support levels to consider on the ES (Z Dec Contract) are:
1429-1430, 1425-1426, 1419-1420, 1415-1416, 1403-1406

Very Short-term bias is to the downside, but overall bias remains long. A reversal could come at any moment, but for now it looks like the market will move lower before it moves higher.

Consolidation Continues, Next Breakout Higher Awaits

The 1444-1445 level on the ES did result in a buying opportunity last week, but the gains were limited as the ES failed to break higher and out of its current consolidation range (about 1445-1460 give or take a couple points). Market is susceptible to a lower low from here, so longs have to be a little careful in the short-run. If ES can dip down to the 1335-1338 area in the coming days, that would provide a lower-risk long entry. It remains a very slow market with limited opportunities. The key is patience. It is important to remind ourselves to await good setups and not force trades. I continue to favor buying dips into support in anticipation of a break-out move higher.

Levels to Watch in Terms of Buying a Dip

The S&P 500 is showing a classic bull flag pattern right now as we consolidate here between 1456 and 1459 on the S&P Cash Index. There is support directly underneath (1450 on the ES Z December Contract for Futures) which makes this very tempting to buy if you are not long already. At the same time there is risk of taking heat on this trade if the bull flag pattern fails. Still a good long depending on how much heat you are willing to take.

Next support levels to watch on the ES (Z December Contract):
1448, 1444-1445, 1441-1442

These are all potential levels to buy (the dip), but if the ES manages to sell down to 1441-1442, that will be a very attractive level. Can't count on that though, we'll have to watch and see how this plays out.

The other option is that support holds at today's lows and the ES rallies up another leg from the current bull flag.

What Latest Fed Intervention Means for the Market

The Fed's announcement last week is very aggressive. With a $40 billion/month open-ended MBS asset purchase program, Bernanke basically said that there is no cap on the amount of mortgage backed securities the Fed will buy. This comes at a time when many economic indicators have been positive (aside from employment) and the stock market is at multi-year highs.

Since there is not a definitive number in the Fed language, there is a certain amount of uncertainty in terms of the amount of stimulus this $40 billion/month represents. But if you listen to what Bernanke did say in his press conference you have to realize that the latest Fed action is extremely aggressive. I will quote Bernanke to emphasize this point.

"We are not going to be premature in removing policy accommodation. Even after the economy starts to recover more quickly, even after the unemployment rate begins to move down more decisively, we're not going to rush to tighten policy, we're going to give it time to make sure the recovery is well established."

-- Ben Bernanke Press Conference, 9/13/2012

So while he/the Fed did not come out and say when these asset purchases would end, it is safe to say they will continue for quite some time.

The market has yet to digest this key point fully, but it will do so over time. What I mean is that the move up over the last two days is only the beginning. Yes, we can have retracements to the downside as the market moves higher, but this market is headed a lot higher.

We must also realize that the Fed will continue to reinvest its existing holdings through the continuation of "Operation Twist" which brings total asset purchases by the Fed to $85 billion/month. And we can't forget that the 0% interest rate policy was extended until at least mid 2015.

In my opinion this is a buy every dip type of market until the fiscal cliff situation comes into play. There will be some up and down action as we approach the November elections and speculation is rampant whether or not the Democrats will maintain office. More confidence that Obama will be re-elected will put some downward pressure on markets, but the path of least resistance will remain to the upside. This will be the case until the Fiscal Cliff situation comes into play following the election. If Obama wins (and this is highly likely), the fear of not resolving the looming tax hike dilemma will be greater and so the downward pressure on the markets will also be greater. There will be a lengthy conflict on whether or not to go through with the scheduled tax hikes as we approach the end of the year. As this Fiscal Cliff debate takes place, the market should finally undergo a correction. So, November will likely be a good opportunity to test the short-side of the market. If the debate over the debt ceiling is anything like the one that took place in the summer of 2011, there will be a healthy move lower in price. Eventually I think Obama will have to delay tax hikes and the debt ceiling will have to be raised to make that possible. Following a would-be sell-off, this will be the time to buy back into the market.

Getting back to the present situation:
Market will likely consolidate and inch higher heading into the first week of October when we get the first Presidential debate between Romney and Obama (10/3/2012) and the next ECB announcement (10/4/2012) and then the US Employment report (10/5/2012).

Fed agrees to increase policy accommodation by purchasing additional mortgage-backed securities at $40 billion per month

Well, we got the additional easing that I didn't actually expect the Fed to announce. I guess the $1.8 Trillion fund managing Bill Gross was right. The Fed did offer more QE...

Market is reacting positively as expected by this kind of news. ES saw an initial gain of almost 12 points following the announcement. It since sold off 10 points providing a dip buying opportunity (in the event of a pro-QE announcement) like I mentioned in my previous post. Lets see how the market reacts to what Bernanke has to say at 2:15 EST. Watch it here.

An (open-ended) $40 billion / month agency mortgage-backed securities buying program by the Fed is significant and you have to favor buying the dips going forward. That being said, this comes on the heels of an already rallying market, one that has seen consistent gains since the start of June 2012. Be careful chasing this market. We could see a sell-the-news opportunity in the coming days. If that happens, consider it a gift, it is a buying opportunity.

To QE or Not to QE? That is Fed's Question

But my question is how much expectation is there that the Fed will announce more QE. There has been much speculation that the Fed will offer a plan to expand its balance sheet by offering additional easing measures today and more pundits seem to be chiming in with this opinion than in times past. While I am ready for the possibility that this may be the case, I do not think it is going to happen.

Yes the employment situation is stagnant, but is buying mortgage backed securities going to change that? Highly unlikely. Another way the Fed could ease, is to lend dollars to the ECB so that ECB could then fund their own easing measures. The US "easing" in this case would be in the assumption that those European lent dollars would eventually find their way back into the US economy. Sounds like a bad idea to me and is unlikely to be announced today. The main reason why the Fed won't offer more QE today though is because the market is at its highest levels since early 2008 and other economic indicators (aside from employment) have been refreshingly positive of late. More QE now would be acknowledgement by the Fed that there is little hope for the economy. There is no way that the time is now to offer additional QE. Keep those tools in the shed Bernanke.

But hey the Federal Reserve isn't asking my opinion and all I can do is speculate on what is going to come out of yesterday's minutes. I won't worry about whether I am right or wrong, I will just be ready to trade the Market reaction to whatever comes out of the Fed announcement and Bernanke's press conference.

We will see the first reaction today at 12:30 EST when the FOMC announcement will be released. The Fed will leave rates unchanged and will likely extend guidance beyond 2014 to keep rates exceptionally low. If there is a new asset purchase program, it will be detailed in the announcement. If this happens, the market will react with volatility and I would look to buy the first significant dip. If there is some form of QE announced we may not even get a significant dip. If you are of the belief that there will be additional QE, then perhaps you are already long going into the announcement. But you have to be cautious playing that game as the market is already bid up quite a bit ahead of that potential news. That is why my biggest question is how much is or isn't additional QE already priced into the market. The market reaction later today should provide answers.

At 2:15pm EST, Bernanke will give his press conference. Again, depending on what comes out of the announcement, the market will be reacting to Bernanke's statements here and we can expect volatility. Ultimately, if there is no new easing/asset purchase program by the Fed, I'll be looking for opportunities to get short and sell any rallies. If there is a new easing program, I'll be looking to buy any significant dips.

As much anticipation as there is ahead of the Fed announcement, I think the bigger issue remains in Europe and not whether the Fed will ease further. I believe that money printing will come from the ECB before it comes from the Fed and likewise, markets seem to react more to what Draghi has to say lately than what Bernanke has to say...

I will comment more following Bernanke's press conference which you can watch here.

Watch Bernanke's Press Conference Live 9/13/2012

Streaming Video by Ustream.TV
To QE or Not to QE? That is Fed's Question. Or Is It?

Strength Confirms as Market Breaks Above Consolidation with Conviction

The market broke out of its consolidation triangle, but the move was not rejected like I thought it might be. The action was based on genuine strength, based on a strong reaction to Draghi's monetary policy statement and to positive surprises on Jobless claims and ISM manufacturing data. The almost 30 point move up on the ES without any sign of selling pretty much confirms the breakout to the upside. Yes, price needs to hold up here and see a higher close to officially confirm the move, but I think it is safe to assume that will be the case. We will likely get some sell opportunities in September, but I'm not expecting as much of a downturn opportunity as I had previously. Following yesterday's move, I expect the markets have further upside ahead of them leading up to the FOMC meeting next Wednesday and Thursday.

Gold has jumped $30+ /ounce following the employment numbers suggesting the speculators are putting higher odds on the possibility the Fed will announce some sort of easing measures following next week's meeting. Its funny that the QE speculation never dies. It has been talked about all summer and though we never get it, the market continues its rise nonetheless. I don't believe we get more QE after next week's meeting either, but more on that later...

Bias toward buying the dips is back on

Will Markets Sell in September?

My view remains that there will be a downturn in September though there is no confirmation yet in the chart patterns that this downturn has begun. I am not holding short positions yet, but as I buy dips I remain cautious. Eventually the consolidation support will break down and if you expect that a bounce will let you escape a losing position unscathed, you will eventually find yourself panicking and taking a bigger loss than anticipated. So that just means that if you are continuing to buy support in this consolidation range, just know your exit strategy and stick to it.

About Jackson Hole
Bernanke didn't say too much new last Friday in his statement on Monetary Policy, but he did say just enough to maintain the consensus that the Fed can and will act when necessary. Like I said in my last post, this thought process keeps a bid under the markets. Economic conditions aren't terrible, economic reports have been more positive than negative and we all know that if things do take a turn for the worse, the Fed has repeatedly committed to using the "tools in its toolkit" to provide liquidity to the markets. This promotes a consensus that the markets are safe. This meddling with natural market behavior, unfortunately, will make markets less safe in the longer term. In the present though, the Bernanke Put continues to maintain support under the markets. At some point though (as a trader you must be aware of it and prepare yourself), the odor of what may be a cleverly concealed bluff by the Fed, will reveal its pungent smell enough to force traders away from the markets and into fresher smelling pastures. When that happens, you don't want to be long. For now though, I can't argue with playing the "Bernanke Put."

Today we have tested the lower consolidation range support again (mid 1390s on the ES). This is a safe long entry as now we await the Draghi/ECB statement on Monetary Policy that will be released Thursday, September 6th.

Lets see which way the market breaks. One scenario I am considering is shown in the E-mini S&P 500  chart below (ES U September Contract). Watch for a fake-out move above the current consolidation triangle which will be followed by a small correction in the markets.

We Await Bernanke's Speech on Monetary Policy Since the Crisis

Bernanke's speech this coming Friday at Jackson Hole should spark this incredibly dull market into some action.

With limited volume and small trading ranges, the E-mini S&P 500 Futures (ES) is up more than 4.2% since the low on August 2nd and is setting up for at least a small correction. September is historically a bad month in the market and it is looking like September of 2012 is setting up to fit that bill.

Much of the price gains the markets have experienced over the summer can be attributed to expectations of further easing by the Fed. There is no chance, in my opinion, that Bernanke will announce any official new easing measures at Jackson Hole. Last week's FOMC minutes that seemed to support more QE have already been disregarded as outdated. Economic data is just not weak enough to warrant it. GDP numbers released this morning were better than expectations adding to the argument against more QE.

So without more easing, I expect the market reaction to be one of selling in September. Its not that the market expects more easing measures to come out of Jackson Hole, but without at least some solid bait to feed on the expectations that more easing is likely to come out of the September FOMC meeting, the market will have no choice but to sell-off a bit from its current frothy levels. At the same time, I am not overly negative on the markets. Not needing additional monetary easing  is a sign that the economy is not weak enough to warrant it. Economic data continues to improve and the market believes the Fed will act if it needs to. This creates an artificial base that will keep price from trading too low. Draghi and the ECB could also spark the markets with news of a bond buying program in Europe.

Once volume picks up, I will post price levels that correspond to the view that a small correction is coming and will be followed by what could be a major buying opportunity.

Fed Minutes Bullish, but Market Reaction Limited So Far

Its interesting to observe market behavior following yesterday's Fed minutes which suggested members are warming up to the idea of increased stimulus. This would have ignited a significant rally had it come a month ago. But yesterday's rally lost steam quickly and markets have already traded down only 4 points off yesterday's lows. 

This morning's negativity is in reaction to St. Louis Fed President Bullard who contradicted yesterday's minutes when he said that current economic conditions do not yet warrant further easing. Even before Bullard's comments, though, the reaction to the Fed's bullish minutes did not ignite nearly the rally that I would have expected. This may be just because we remain in the summer vacation time-period in the markets, but it may also be signalling that the markets do not have that much steam left to push them higher. 

That being said, I continue to like the market if the ES trades down to the lower 1400s and support confirms there. So we'll see how the first hour of trading goes this morning. I like long entries down in the lower 1400s on the ES.

No Signal for a Reversal Yet as Markets Continue Slow Grind Higher

Nothing has changed, expect light trading to continue this week. I thought we might get a short entry signal before the end of last week, but it didn't happen. There remains plenty of resistance overhead, so I continue to like shorts at new highs while buying dips. There will be a nice opportunity to hold a short entry for at least 30 points, but until we get a signal, I have to favor taking profits on short entries relatively quickly and buying the dips...

This morning I will consider buying the market if the ES trades down to 1405-1407 and overall will be watching for a trading range between 1400 and 1430 this week.

In fact, there are two overhead resistance levels I will be watching on the ES:
1420-1421 and 1430-1431.

I will look for signals to enter short at or around both of these levels this week on the ES.

Overall though, at least for the time being, you have to favor the long side. When it is time to enter short and hold for a significant gain, I will post about it...

Summer Trading = Dull. Still, Opportunities Exist

Last week was even less exciting than I expected with the ES trading in less than a 17 point range, less than my already conservative 20 point expectation. Nothing has really changed, I expect limited action and limited trading volume to continue this week although the range should expand a bit. I continue to look for opportunities to sell this market. Last week the 1400 level provided many opportunities for short plays. This week should provide more of the same. We are already seeing another slightly higher high (1404 ES) sell off this morning. In the current market climate, when I say sell the market I am talking day trades and taking profits when you get them, whether that's 5 points, 7 points or 10 points.

Although there are great opportunities for shorts, in the current action, you have to favor the upside with the realization that the upside is limited. I fully expect 1409-1412 ES (on the U-September Contract) to be tested early. I will look for shorts at this level, like I was looking for shorts at or above 1400 last week. When selling does finally take hold, I expect the ES to trade down to 1375 and possibly as low as 1365. That's a potential 35+ point swing and that's the trade of the week. We'll have to wait and see though as there is no sign of sellers entering the market yet. 1409-1412 needs to be hit before I will consider holding any short entries for a significant gain. If that view changes I will post comments about it.

Lets not forget there are plenty of buying opportunities as well, without a move up to about 1410 first, I will like buying the dips.

Levels to watch today on the ES:
Resistance above at: 1405-1406, 1408-1409, 1411-1412
Support below at: 1395-1396, 1391-1392, 1387-1388

Market Begins the New Week on Strength

After hearing from the Fed and the ECB last week as well as getting a good amount of economic news like the US employment report on Friday, the week ahead looks to be much less interesting.

I have made it clear that I like short entries as the markets continue to make slightly higher highs, but last week's finish makes me less excited about the short side. It is always better to act first when an opportunity presents itself and the ES already sold off more than 30 points after crossing the 1380 mark that I spoke about early last week.

The latest price pattern negates much of my enthusiasm for a potential significant move lower. That being said, there remains plenty of resistance overhead and unless we see confirming action above 1400, Markets remain technically bearish in the bigger picture. That could easily change soon.

Right now I am focused on the 1380-1400 range on the ES. I like shorts at the upper end of the range and longs at the lower part of it in the near-term. We'll have to see if the market confirms above 1400 or below 1380 to better gauge future direction...

Levels to watch today on the ES:
Resistance Above at 1395-1396, 1399.50-1400.50
Support Below at 1383-1384, 1380-1381, 1374-1375

FOMC Minutes Offer No Surprises.

As expected, nothing of particular interest came out of the FOMC Minutes. Market initial reaction is sell. We'll see if the 1368-1370 support can hold this afternoon. Can't rule out a suckers rally to another new high just yet. I'll of course be looking at opportunities to get short if we do get such a rally.

From the Minutes:
Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions--including low rates of resource utilization and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014.

Market Continues Consolidation Ahead of FOMC Minutes

Took two days of trading, but both the trade setups I mentioned in Monday's post have come in to play. The sell above 1385 and the buy below 1372 on the ES. If still holding a long from the low 1370s, I would consider taking profits between 1382 and 1385. There is, however,  a solid possibility of seeing a higher high, so if you are holding more than one contract, scaling out of the position would be smart.

Next step is to wait for the FOMC minutes at 2:15pm EST. I don't expect any new information to come out of the minutes. The Fed has no reason to offer up more QE at this time, and unless there are some surprises, the only market reaction I can expect, is one of selling. I continue to prefer short entries if ES trades back above 1385 or if the ES moves above Monday's high.

Levels to watch today on the ES:
Resistance Above at 1385-1387, 1390-1391
Support Below at 1368-1370, 1361-1362

Market Enthusiasm Sends Price Higher, But Into Next Level of Resistance

My expectations of a move back up above the previous highs were looking bleak following a rare earnings miss from Apple last week, but market sentiment quickly changed following comments by Mario Draghi that the European Central Bank, "is ready to do whatever it takes to preserve the Euro." European markets took off and US Markets followed. The ES rallied 27 points off the Thursday morning lows and continued higher on Friday following better than expected US GDP numbers. The ES closed up another 27+ points marking the 3d consecutive day of positive gains.

I said I would sell anything above 1380 on the ES and I do remain bearish up at these levels. That being said, I don't expect an immediate reversal to the downside amidst the current market enthusiasm. Today, following three consecutive daily gains totaling more than 60 points, I expect consolidation. I'll consider buying a move down to around 1372 this morning and selling any moves back up at, or slightly above Friday's highs.  

I expect the enthusiasm to fade fairly quickly. After a couple of day's of consolidation to begin the week (to pick off the overly excited bulls and the overly eager bears), I will then look to hold a short position a little longer. For the moment, its consolidation, after that, there will be a solid opportunity to the downside. I'll comment again as the action unfolds this week.

Levels to watch today on the ES:
Resistance Above at 1384-1386, 1390-1391
Support Below at 1372-1373, 1369-1370

Markets Unsure Amidst Negative Sentiment

My market outlook to begin last week turned out to be spot-on as dips were bought and the ES crossed into key resistance in the 1370s. It has since sold off almost 45 points. European concerns are evident as current market sentiment is weak.

US treasury yields reached historic lows yesterday as the 10 year note hit 1.395%. At the same time, the Spanish 10 Year yield ballooned to almost 7.5%. Moody's cut its outlook on Germany yesterday as the health of Greece and Spain are a concern.

Today's trading will be important to get a gauge on what to expect next. I'll be watching to see if the 1335-1338 level holds this morning. There is support underneath that at yesterday's low's as well and as long as we see the 1330's hold this morning, I will look for continued buying to follow, though trading action may be slow and boring.

In the short-term, the ES remains in a bullish up-channel dating back to early June and I will not be surprised to see last week's highs tested again and even broken. Again, this will be a key resistance level and will likely be sold. I will look to sell anything above 1380 ES. As always, i will wait for confirmation that there are sellers at that price level before jumping in short.

A close below 1339 today will be negative and will suggest further downside is ahead. So we'll wait and see how price action unfolds.

Levels to watch today on the ES:
Resistance Above at: 1348-1350, 1356-1357
Support Below at: 1337-1338, 1331-1332, 1327-1328, 1321-1322

Bullish Bias to Begin the Week

Friday's buying surge represented a bullish breakout pattern from the short-term downward action that began on 7/5/2012.

Higher lows dating back to the beginning of June indicate overall bullish sentiment in the immediate-term.

This means I favor buying the dips right now.

The next level of key resistance is around 1370. If price action confirms resistance at or above 1370, I will look for short entries. Looking at the bigger picture, technically, markets are bearish dating back to the April highs. This is why I will like shorts again above 1370 ES. As long as the ES does not close above 1383 in the coming week, the bearish overall picture will continue. On that note, I will be expecting to turn my outlook bearish by end of the week and into next week. Price action will obviously have to confirm this, so we'll see...

For today, expect consolidation following Friday's rally.

Levels to watch today on the ES:
Resistance above at: 1353-1354, 1356-1357, 1360-1361
Support below at: 1339-1340, 1335.50-1336.50, 1332-1333

What to Expect Following Strong Buying Momentum

The ES E-mini S&P 500 Futures rallied up more than 50 points in less than two days of trading to close out last week. It began with a big move up (17+ points on the ES) late in the day on Thursday.

This move happened without any headlines to speak of (somebody is either a very good speculator or else was privy to some inside information).

Later that evening (or in the early morning hours in Europe) futures markets shot up again (including a 14+ point move in less than 10 minutes) following headlines that the Eurozone agreed to plans for a 120 billion euro stimulus plan. Spanish banks would be recapitalized without seniority being given to the payback the EFSF before other lenders. On top of that, Spain would not have to take on more sovereign debt. This was very positive for the markets and catalyzed what would eventually result in a more than 2.5% gain on the ES by the close of trading on Friday.

Looking back at positive moves of 40 points or more (from low to high on a daily candle **) on the ES since 2008, we see that the next daily move on the ES averaged negative 4.25 points or an average loss of -0.41%. Below you can see results each of the last times this happened since the beginning of 2008 on the E-Mini S&P 500 Futures:

ES Move of 40+	Next Day
Date	Points	Percent
1/31/2008	24	1.83%
3/11/2008	-13.5	-1.07%
3/18/2008	-33.5	-2.64%
3/20/2008	25.25	2%
4/1/2008	0.75	0.06%
7/16/2008	13.5	1.15%
9/30/2008	1	0.09%
10/13/2008	-9.75	-1.03%
10/20/2008	-33.5	-3.63%
10/28/2008	-11.75	-1.35%
10/30/2008	7.5	0.84%
11/4/2008	-44.5	-4.77%
11/13/2008	-46	-5.49%
11/21/2008	47	6.43%
12/16/2008	-10.5	-1.24%
3/10/2009	4.75	0.73%
3/12/2009	6.75	0.99%
3/23/2009	-14.5	-1.93%
5/10/2010	-3.75	-0.34%
5/27/2010	-11.75	-1.12%
7/7/2010	8.25	0.81%
8/9/2011	-47.5	-4.14%
8/23/2011	13	1.15%
9/26/2011	12	1.05%
10/4/2011	20.5	1.87%
10/18/2011	-16.25	-1.35%
10/27/2011	-1.25	-0.1%
11/30/2011	-2.5	-0.2%
6/29/2012	?	?%
Average	-4.15	-0.41%

If we add another 10 years of data behind this, the results are less profound. The next trading day still averages out to be negative, but at an average loss of 0.25 points or -0.07%.

** We assume that the 40+ point ES move finishes with a strong close. When calculating the historical stats, the close needs to be no less than 25% from the high in terms of the overall move. So if the move was 40 points, the close needs to be within 10 points of the high.

Watch FOMC Press Conference with Ben Bernanke Live June 20th, 2012

Click here: for the Latest Thoughts on Bernanke and the Fed.


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FOMC Announcement to come at 12:30pm EST today and will be followed by Ben Bernanke's press conference at 2:15pm EST. It was only a little more than two weeks ago that the ES traded down as low as 1255. The ES has been bid up 100+ points since then and you can attribute the buy orders as speculative bets that the Fed would announce some new easing measures or stimulus or QE3 at the next meeting (which will be announced today). 

Things looked much worse a couple of weeks ago than they do today, at least in terms of stock market prices and an argument for more easing was more plausable. My thoughts on the announcement today is that there will be no new major news. Bernanke will repeat the same things we have heard in the past...

• Unemployment levels remain elevated, but labor market conditions are improving
• Increases in inflation levels are transitory, longer term inflation levels remain stable
• The committee expects to see moderate growth continue over the short-term and to pick up gradually over coming quarters. This in turn will help bring down levels of unemployment over time.
• The committee expects to maintain a highly accommodative stance on monetary policy for the foreseeable future

With stock prices only 4% off this year's highs and economic conditions relatively stable, there is no way the Fed can rationalize another round of QE. Operation Twist is scheduled to end in September, so look for the Fed to announce that this will be extended. That will not be a surprise and should not provide any catalyst for buying. Without some form of stimulus in the form of QE or some sort of assistance to help the debt situation for countries like Spain, Greece, Italy or any of the Other PIIGS, expect the markets to be disappointed. This is my expectation and therefore I will be looking to sell any rallies looking forward assuming the Fed does not offer any surprises. We'll see... I'll comment following Bernanke's press conference...

To summarize, I expect the Fed to disappoint by not giving the market what it has become accustomed to getting, more QE. This is negative for the stocks and means that I am bearish looking forward. I like selling rallies and will not be surprised to see lower lows in the coming months. If Bernanke does offer up any surprises today, my outlook will change, we'll have to wait and see.

Bad Employment Numbers Crush Market

The ES was already down over 1% this morning following weak PMI Data in Asia and Europe. Upon disappointing numbers regarding the US Employment report, markets plummeted with the ES falling more than 12 points in less than 2 minutes.

This negates my bullish sentiment regarding a bounce to 1350 ES. I am wait and see mode now to see if the market has continued downside potential or if support can come in now after a pierce of the 5/21 low.

Market Teetering on Support Amidst European Fears

Fears over the European situation are high. The Euro sank to $1.2357 against the dollar yesterday and US markets sold off along with it. Amidst market fear however, key support is holding on the ES at 1305-1309. As long as we don't see a daily close below this price point, I continue to prefer the long side in the short-term as my 1350 (at least) price target remains.

Levels to watch today on the ES:

Resistance above at 1315-1316, 1319-1320, 1325-1326

Support below at 1308-1309, 1305-1306

Market Bounce Still in Effect

US markets remain in bounce mode as there is still more room to the upside left to go. Buyers continue to step in underneath current price levels confirming support in the short-term. I continue to prefer buying the dips as I expect a move to at least 1350 on the ES. We'll need to watch price action at that point to determine if the bounce can extend higher or not.

Levels to watch today on the ES:
Resistance above at: 1330-1331, 1337-1338
Support below at: 1319-1320, 1313-1314

Big Rally Yesterday on Expectations of More Easing

We saw lots of price movement yesterday but ultimately the action confirmed the idea that the market currently favors the upside. After threatening to move lower throughout the morning, the ES managed to rally back up by the afternoon.

The huge late day rally as well as much of the positive sentiment can be attributed to rumors and/or expectations of new easing measures by both the ECB and the Fed. This sets up huge expectations heading in the Fed's June meeting. In any case, I prefer buying dips for now as I expect a move up to 1350 or above on the ES.

Levels to watch today on the ES:
Resistance above at: 1325-1326, 1330-1331, 1334-1335
Support below at: 1311-1312

Quick Update After Sick Leave

I was out of commission for the past week with a stomach virus but am on some antibiotics and feeling better now. Regarding Monday's rally off the 1287.25 low on the ES, I believe we should see a short term upward move to at least 1350 from here, so I like buying the dips for now. The overnight low of 1302.25 marks good support and  represents a good spot to consider long entries. Overall we are still bearish so I will be favoring short entries once the ES trades back to 1350 or above.

Gapping Down to Begin the Week

Selling resumes to begin this week as there are a variety of concerns on the minds of market participants. Formation of a coalition government in Greece was unsuccessful over the weekend and it seems more and more likely that Greece will exit the Euro. The JP Morgan situation continues to be a concern as losses could be worse or get worse than what has currently been reported.

I prefer selling rallies but I expect support to hold up today between 1326 and 1330 on the ES.

Levels to watch today on the ES:
Resistance above at: 1343-1344, 1351-1352, 1356-1357
Support Below at:  1330-1331, 1325-1326

JPM Reports Significant Mark to Market Losses

This is a surprise and could have significant consequences on the market. I take back my long bias in light of this news. Need to investigate the JP Morgan details further... Click here for covereage of the JPM conference call

ES currently down 10 points...

Short-Term Bottom Likely In

Yesterday's volume and price action suggest that a short-term bottom may have been put in. I prefer buying the dips now and do not expect yesterday's low  of 1339.25 ES to be tested. Tentatively, I am looking for a move up to 1390 ES over the next week or so...

This morning, initial jobless claims came in slightly better than expected and continuing claims declined. This should only put additional support under the markets.

Any new negative developments out of Europe could negate my views, so that is of course something to keep an eye on...

Levels to watch today on the ES:
Resistance above at: 1365-1366, 1370-1371
Support Below at: 1356-1357, 1352-1353

Yesterday's Afternoon Rally Reverses Overnight

The market remains concerned about the implications of continued political uncertainty in Greece. Yesterday's afternoon gains have been completely erased as markets are down across the globe this morning.

Gold is also under pressure, currently trading underneath $1600 for the first time since last year. Gold could easily threaten its December lows around 1539 if the political shifts in Europe continue to move in the direction of anti-bailout philosophy.

I prefer selling rallies right now as I expect ES is on its way to 1330

Levels to watch today on the ES:
Resistance above at: 1350-1352, 1357-1358, 1361-1362
Support Below at: 1342-1343, 1336-1337

Volatile Overnight Session on European Headlines

I finished last Monday's post by saying that it is just a matter of time before European headlines would move markets lower and it took less than a week. In French presidential elections, incumbent Sarkozy lost to socialist Hallonde signaling policy change there which points toward anti-bailout or anti-Keynesian sentiment. Hallonde winning was more or less expected though, so the real market driver was the results of elections in Greece. The two main coalition parties, the ones who have supported the euro rescue and the forced march to austerity, lost badly. This suggests there is now a lack of a pro-bailout coalition government, and without aid to Greece from the IMF, Greece does not pay back loans to European banks. This is the real catalyst that triggered the ES to sell down 20 points as the GLOBEX session opened yesterday.

In light of the negative news, markets have since recovered most of the early losses. It will be important to see how the ES trades as the market opens this morning. Price on the ES will need to move back above 1361 and stay there following the first hour of trading, otherwise weakness will continue. If selling does resume and the ES closes today below 1352, I will expect price to move down to 1330-1331 relatively quickly.

Levels to watch today on the ES:
Resistance above at: 1361-1362, 1365.50-1366.50, 1372-1373
Support Below at: 1350-1352, 1343-1344, 1338-1339

Employment Numbers Disappoint

The April non-farm payrolls report came in significantly lower than expectations this morning sending the markets on a wild ride of selling and then buying and then back to selling. The ES traded down almost 9 points in 2 minutes but quickly recovered and moved back up 10+ points to test the overnight high in the following couple of minutes. The ES has since sold back down.

This morning's economic data was important because the markets were trading at key support. Breaking down below the 1386 support on the ES following the non-farm payrolls miss suggests there is further downside ahead.

What I'm watching for today:

I want to see if the current low at 1378.25 ES can hold this morning. The fast reversal from earlier could have been a shake-out of some longs and signal that a move back to the upside is coming.

If we make a lower low today (which is highly likely), the next level I will be watching is 1375 ES, which is the 61.8% retrace from the May 1st high to the April 23d low. We need to close above this level today to consider that a reversal back up to 1400 ES and possibly a double-top could still be possible in the near term.

So its all about seeing how price action responds to the support below in what is currently a weak trading environment. I will be considering long entries only if it looks like there is some solid buying coming in  at support levels. This could be the beginning of a move lower, but too early to tell just yet... We'll see if the market can find support within the first hour of trading.

Levels to watch today on the ES:
Resistance above at 1383-1384, 1389-1390
Support below at 1375-1376, 1370-1371

Support Continues to Hold as Markets Attempt to Move Higher

The prior resistance at 1390 ES continues to hold up as support and I remain biased toward buying dips in the short term. This morning, jobless claims came in slightly better than expectations setting a positive tone. The ECB left rates unchanged in its announcement this morning though some selling has entered the market in reaction to comments from ECB's Mario Draghi that there are no plans for further rate cuts. If we see more selling in the early going, it should create a buying opportunity.

Levels to watch today on the ES:
Resistance above at: 1404.50-1405.50, 1411-1412, 1414-1415
Support Below at: 1394.50-1395.50, 1389.50-1390.50, 1385.50-1386.50

Market Showing Some Weakness this Morning Following Four Days of Gains

Following four straight days of gains and seeing the ES break out above its upper range resistance at 1390, we head into this week with a bit of bullish sentiment. At the same time though, there remains solid resistance overhead. My bias is slightly toward buying dips, but I expect choppy markets to continue and I am confident selling key resistance levels as well.

The ES has moved 50 points off the lows from back on April 10th. As we see some selling today, I expect the 1386-1390 area to provide at least some short term support on the ES. A move back up to make a double top  (1419.75 ES) or close to it is a solid possibility in the coming week.

The market had no problem shaking off bad news last week, we'll see if it can do the same this week. We'll begin with Spain, which has technically fallen into recession with a -.3% GDP being reported earlier today. The news isn't quite as bad as it sounds though, as the -3% GDP was actually better than expectations, but the S&P also downgraded 16 Spanish banks. Spanish unemployment is now at 24.4%, that is a quarter of the population and is a very ominous sign for Spain. You have to remain concerned at the European situation looking forward. It is just a matter of time before European headlines begin dictating price action to the downside again...

Market Shrugging Off Bad News

Yesterday after the close, S&P downgraded France's Credit rating two notches to BBB+ and the market immediately sold off. Buyers have stepped back in overnight though as the French credit downgrade is not a big surprise. The ES went on to make higher highs earlier this morning crossing back above the 1400 level. Shortly after, the US GDP numbers were released showing a disappointing growth of 2.2% versus expectations of 2.5%. Markets briefly sold off, but buyers quickly stepped back in and the ES is moved back above 1400 again.

Europe has witnessed disappointing bond auctions in Italy, lower consumer confidence in Germany and worse than expected consumer spending in France, yet the FTSE, the CAC and the DAX are all trading higher this morning.

Markets don't seem to care about bad news and that is likely to do with strong technicals as the ES broke out of a 13 day trading range yesterday and closed well above prior resistance at 1390. The resilience has surprised me a bit amidst a barrage of bad news and data but I have to be guided by what price action is telling me and that is that the market is bullish, at least for the immediate term. I have to favor buying the dips at the moment, though I continue to expect choppy action and think any follow through to the upside today will be limited... It will be important to see if strength can be sustained past the first hour of trading this morning.


Levels to watch today on the ES:
Resistance above at: 1403-1404, 1406-1407, 1411-1412,
Support Below at: 1395-1396, 1389-1390, 1386-1387

Market Opens Lower on Poor Data Out of Europe and Disappointing Jobless Claims in the US

Weak data in Europe and disappointing initial jobless claims in the states have sent futures lower this morning.

Bernanke's press conference yesterday did not reveal anything that the market didn't already know, so I can't say my overall bias changes one way or the other following the comments. We continue to be trading in a range with support in the low to mid 1350s ES and Resistance in the high 1380s ES. We'll eventually break out of this range and my bias remains that we will make lower lows before we make higher highs.

Regarding the FOMC announcement, the one major point of significance that I can't ignore, is the emphasis that Bernanke put on how accommodative the Fed has been in its effort to ensure that the economic recovery continues. He made it clear that if economic conditions warrant it, the Fed will use the tools in its toolkit as necessary. He actually responded to a question about QE3 and said that the Fed would initiate QE3 as needed. This is not going to be the catalyst to send the markets back up to the highs in the immediate term, but it is a philosophy of the Fed that will keep a floor underneath the markets looking forward. And all this means is that if things get bad in the future, the Fed will prevent the market from crashing like we experienced back in 2008 and early 2009. It basically takes the fear out of the equation and tells me I can be a confident buyer when the time comes that things look to be at their worst.

Levels to watch today on the ES:
Resistance above at: 1387-1388, 1392-1393
Support below at: 1381-1382, 1375-1376, 1371-1372

Watch FOMC Press Conference with Ben Bernanke Live Today 4/25/2012 at 2:15pm EST

Click here: for the Latest Thoughts on Bernanke and the Fed.



Streaming Video by Ustream.TV

Watch for volatility in the markets this afternoon. A failure to show a positive inclination to more easing or QE3 shouldn't have as much of a negative effect on price action as it has in the past, as the market is not expecting it as much as in previous months. One thing to look out for is the Fed's forecast on growth and inflation and if it continues to stick with the plan to keep rates low. Any mention that there is not a need to stick with the plan to keep rates low until at least 2014 should influence selling in the market. In any case, I think there is more of a chance for disappointment in reaction to the Fed's forecast rather than elation... we'll see...

Apple Earnings Boost Markets as We Wait for the FOMC Announcement

We got the market strength I was expecting following strong Apple earnings after yesterday's close and that strength continued overnight as the ES traded up as high as 1382. Some selling briefly entered the market following a disappointing durable goods number, but buyers quickly stepped back in.

I'll be waiting for the FOMC announcement (12:30pm EST) and Ben Bernanke's press conference (2:15pm EST) later this afternoon. Bernanke will be careful to be as vague as possible in his comments. He will say that the economy is recovering but not at as fast a clip as the Fed would like and that if economic conditions warrant it, the Fed has the ability to act which means more easing, which means more QE. At the same time he will hint that he sees no need for more QE and that if economic conditions continue to improve, the Fed could raise interest rate sooner than previously stated. While the market interprets this we will see moves upwards as one interprets there could be more QE and moves downward as one interprets that interest rates may not stay low forever.

As long as Bernanke maintains vagueness with his Fed speak, I think you can buy any sharp sell-offs and sell any significant rallies this afternoon. I expect choppy market action will continue.

Levels to watch today on the ES:
Resistance above at: 1384-1386, 1389-1390, 1395-1396
Support below at: 1375-1376, 1370-1371, 1364-1365

Markets Still Weak, Await Apple Earnings After the Close

Markets attempted to continue the rebound off yesterday's lows overnight but have since sold off a bit. Not much to look at today. I expect weakness and I'll be waiting to see the Apple earnings this afternoon. A good number from Apple will likely help the markets to regain some bullish sentiment at least in the short term. So for now, I'll expect further weakness today and consider the strong possibility of some market strength heading into tomorrow. Consumer Confidence, New Home Sales, FHFA Housing Price Index due out at 10:00am EST could influence market direction.

On a side note, FOMC meeting is today so we'll get the FOMC announcement tomorrow at 12:30pm EST and Ben Bernanke's press conference at 2:15 EST. Not expecting any significant action until then


Levels to watch today on the ES:
Resistance above at: 1369-1371, 1374-1375
Support below at: 1358-1359, 1353-1354

Markets Remain Choppy As We See a Bounce to the Upside Overnight

The ES has retraced 61.8% of the way back up to yesterday's highs following a similar bounce in European markets. I expect continued choppy action within the recent range today. Will be interesting to see if the 1390 level will hold on the ES as we enter next week. I believe it will and that lower lows are ahead. We'll see.

Levels to watch today on the ES:
Resistance above at: 1380-1381, 1385-1386, 1389-1390
Support below at: 1370-1371, 1365-1366

Market Weak Following Rumors of French Downgrade and Disappointing Jobless Claims

It was an active GLOBEX session last night as the ES made a slightly higher high piercing above the previous double-top of 1388.50 and then selling off all the way back down to the bottom of the overnight range. The sell-off came on the heels of some rumors that there could be a downgrade of French sovereign debt. Markets have now sold off some more following worse than expected jobless claims in the US.

Sentiment is negative this morning and my bias is the same, so I prefer selling up-ticks today.

Levels to watch today on the ES:
Resistance above at: 1384-1385, 1389-1390
Support below at: 1375-1376, 1371-1372, 1365-1366, 1360-1361

Pullback After a Big Pop

Market rallied with great conviction yesterday as sellers were no where to be found. I was looking to buy into yesterday's rally but never saw a trade setup that I liked as the market never pulled back. ES rallied up to Friday's highs but couldn't break through and, as has been common of late, the market sold off at the end of the day.

The ES has traded down more than 10 points now off yesterday's highs. This morning we'll have to see if support holds at 1375-1377. I'm a buyer in this range at least for a bounce. The fact that yesterday's momentum, albeit mostly on low volume, sold off so easily overnight shows me this market is still weak. That being said, I still expect a move back up to test 1400 on the ES and yesterday's rally may have been the start of that move.

Levels to watch today on the ES:
Resistance above at: 1386-1387, 1392-1393
Support below at: 1375-1377, 1370-1372, 1365-1366

Just to note: European markets are down as well this morning following what was an even bigger rally yesterday than we saw in US markets. Concerns remain in the European banking system, specifically in Spain.

Support Holding, Market Looking to Extend Overnight Gains

Markets strong this morning following Europe's lead as there was strong demand for Spanish T-Bills even with high yields. Support in the lower 1360's held up overnight on the ES and I favor buying the dips today. Keep in mind that the ES still needs to break above 1377 and stay there to confirm today's strength. I like longs if ES ticks back down around 1366.

Levels to watch today on the ES:
Resistance above at: 1376-1377, 1383-1384
Support below at: 1365-1366, 1361-1362

A Slightly Broken Market Means Lower Lows Likely

The path of least resistance at the moment remains down but there remains plenty of support underneath. What does this mean? It means that I expect choppy action to continue though my overall bias is to the downside.

Key up trend support channels dating back to the October 2011 lows broke down to begin last week on both the S&P 500 cash index as well as the SPY. A subsequent lower low followed and the first attempt at a bounce was quickly rejected. This action officially moves my bias to the short side overall. E-mini S&P 500 futures remain in their up-trend channel dating back to October of last year, but the price action is still weak.

Although my overall bias is bearish, I will be looking for support to come into the market this week at 1352-1353 or 1344-1346 ES.

When I see price action that confirms support, regardless of the level, I will be looking to position myself long in anticipation of a move back up toward 1400 ES. I like short entries from there.

Relief Overnight

Markets have rallied off of yesterday's lows overnight. It was a tricky trading environment to close out the session yesterday. I liked support around the 1355 price point on the ES, but it wasn't easy to catch and hold that entry. The market failed on 3 attempted rallies before finally taking off to the upside just at the closing bell at 4:00 EST. This morning, more than 16 points later, the ES finally found some resistance just below $1370.

The bid is mostly a technical move following a short term over sold environment, though Alcoa did kick off earnings yesterday by beating estimates by .10c. The move follows Asian and European markets higher as well.

If this strength is to be anything more than just a bounce, The ES will need to trade above 1372 and stay there today. That being said, I will look to get long on any retest of the 1355 area today.

Levels to watch today on the ES:
Resistance above at: 1370-1372, 1378-1379,
Support below at: 1360-1361, 1354-1355, 1345-1346

Markets Remain Flat

Support has held so far but there has been very little enthusiasm on the buy side. Asian and European markets are down this morning. Italian and Spanish bond yields are surging with 10-yr yields climbing to 5.57% and 5.92% respectively, adding to negative sentiment.

Levels to watch today on the ES:
Resistance above at: 1381-1382, 1387-1388, 1391-1392
Support below at: 1373-1374, 1370-1371, 1363-1364

Disappointing Employment Numbers on Friday Send Markets Lower

Futures plunged on Friday morning following disappointing employment numbers, specifically the non-farm payrolls report of 120K versus 200K expectations. All three of the major averages dropped close to 1%.

Futures are more or less flat ahead of this morning's open. It will be important to see if any buying can come in today. The ES closed below its up-trend channel support dating back to last December. Follow-through weakness by means of a lower close today will strongly suggest that there is further downside to this correction. If the indices don't close below Friday morning's low however, there will be no confirmation technically that the overall bullish action is finished.

Levels to watch today on the ES:
Resistance above at: 1379-1380, 1384-1385, 1391-1392
Support below at: 1371-1372, 1363-1364

Market Remains Under Pressure as More Selling Comes in Overnight

The ES is trading below the previous day's low for the second consecutive morning ahead of the open. Yesterday marked the second 1% loss for the S&P 500 this year as negative sentiment continues to stem from both anti-QE sentiment from the Fed and from renewed sovereign debt concerns in Europe.

Overall bullish up-trend channel remains intact on the S&P 500. A close below 1397 on the S&P 500 cash index or below 1380 on the ES will threaten that overall bullish sentiment.

Levels to watch today on the ES:
Resistance above at: 1390-1391, 1396-1397, 1399-1400
Support below at: 1384-1385, 1379-1381

Markets Weak Following Yesterday's FOMC Minutes

Markets very weak this morning as ES is now trading below yesterday's lows. The negative reaction is in response to yesterday's FOMC minutes in which members suggested that the timing of the removal of existing accommodative policy could be moved up from the existing late 2014 date if significant improvements in economic data warrant it.

European markets also lower as Spanish bonds yields at highest level since November of last year.

Levels to Watch today on the ES:
Resistance above at: 1399.50-1400.50, 1404.50-1405.50, 1408-1409
Support below at: 1394.50-1395.50, 1389-1391, 1384-1385

Bullish Ways Continue

European markets lower this morning as sellers have maintained control throughout the session. Weakness could be in response to rising yields on Spanish and Italian Debt.

US Futures trading slightly lower ahead of the open but the market overall remains bullish as we continue to see higher lows and higher highs. One scenario I am watching for today is to see initial weakness that could bring the ES down to 1402-1403 in the early going. From there I would anticipate buying that could lead us back up to the mid 1410s and possibly beyond followed by new highs tomorrow. In any case, I continue to like buying the dips and will consider entering long positions at support levels.

FOMC Minutes this afternoon at 2:00pm EST

Levels to watch today on the ES:
Resistance above at: 1414-1415, 1417-1418, 1420-1421
Support below at: 1406-1407, 1402-1403.50, 1396-1397

Following a record first quarter in 2012, I thought I'd finish this post with a quote from David Rosenberg's first quarter recap:

"The S&P 500 surged 12% (and 3.1% for March; 28% from the October 2011 lows), which was the best performance since 1998. It seems so strange to draw comparisons to 1998, which was the infancy of the Internet revolution; a period of fiscal stability, 5% risk-free rates, sustained 4% real growth in the economy, strong housing markets, political stability, sub-5% unemployment, a stable and predictable central bank."

It is amazing to think about the recent gains given the state of the global economy. Easy monetary policy sure does make up for lack of jobs, slow growth and a terrible housing market, at least in terms of the stock market...

Weakness Continues With Disappointing Initial Jobless Claims Number

Market remains under pressure. Initial claims came in at 359,000, which is trending down, but was higher than revised expectations of 350,000. Market has maintained weakness as a reaction and remains under pressure.

ES will likely trade down to 1377-1381. ES should find support there and that price area will be a good long candidate. We'll have to see how much buying can come in at that point, but I expect that the market will rally from there. As was the case yesterday, it is best to wait for confirmation of support before taking a long entry. There is definitely a change in market behavior of late as buying the dips is no longer as easy as we have been accustomed. There is much more contention between buyers and sellers at support levels now.

My expectation is that the official downturn has not yet begun, though the recent move to the high of 1419.75 is a potential topping pattern. The uptrend is still intact however, and until this is not the case, I remain biased to buying the dips.

Currently looking at key support at 1377-1381 ES

If that support does not hold, the next level to watch is 1369-1370 ES. I would be a confident buyer there.

Market Remains Slightly Weak Following Monday's Rally

I think there is a little more downside left here before I like long entries. If the ES can trade down to the 1396-1397 price point I will look to buy into the market, that's the best trade I see for today... If the lower 1400s (ES) hold in the first hour of trading, I will consider getting long sooner.

Levels to watch today on the ES:
Resistance above at: 1410-1411, 1415-1416
Support below at: 1401-1402, 1396-1397

Back Above 1400 on the ES

After feigning weakness with three straight days of declines last week, buyers stepped in at the end of the week. The ES rallied 14 points off the low on Friday. That rally continued last night and got an added boost when Ben Bernanke mentioned (in comments this morning) that the Fed must consider more accommodation to aid the recovery. The ES quickly rallied an additional 5 points. Gold, which has struggled a bit lately, surged more than 1.2% immediately following the comments.

Levels to watch today on the ES:
Resistance above at: 1403.75-1404.75, 1408-1409
Support below at: 1399-1400, 1396.50-1397.50

Weakness To Begin The Day Presents Another Buying Opportunity

We begin today's trading with weakness again as the ES has sold down 10 points overnight following losses in Europe and Asia. Weakness may be in response to BHP Billiton suggesting iron ore demand in China is slowing.

We are seeing solid support hold up so far just above the highs from 3/14 and 3/15. Most of this year my bias has been bullish and this means I have favored buying the dips (as I frequently say). This morning is one of those opportunities. If you were, or are able to get a buy entry in the 1395-1395.50 range, it allows you a low risk opportunity to the long side. There is a decent reversal pattern off the low of 1394.25 which allows you to use a small stop at or just below the low making your risk to reward very favorable. If you get stopped out, you can always get long again if support holds and another reversal pattern emerges.

I'm Long ES at 1395.50. First target 1402. Will consider exit if ES trades below 1395, can always get back in long when support confirms.

Levels to watch today on the ES:
Resistance above at: 1401-1402, 1408-1409
Support below at 1393-1394, 1387-1388, 1384-1385

Quick Thoughts This Monday Morning

Markets showing a little bit of weakness this morning following last week's move higher. Not much to say here other than to maintain my preference of buying the dips. We have been experiencing relentless bullish action over the past three months. As long as the price action continues to confirm it, I'll continue to expect it.

Looking a little further ahead however, I will be watching the 1440-1450 range. If the ES trades there in the next week or two, I like shorts and will expect a pullback to at least 1400 from there.

Levels to watch today on the ES:
Resistance above at: 1400.25-1401.25, 1403.25-1404.25
Support below at: 1394-1395, 1388-1389

The market saw an initial sell reaction overnight to news that Greece's recent debt swap drew participation from more than 80% of its private sector holders. This was more or less in-line with market expectations and the market quickly shrugged off the news as it was pretty much priced in following the best two back to back trading days in more than three months. This of course followed the worst sell-off in more than three months. It seems that buyers continue to be willing to step in and buy the dips.

US trade data showed a deficit of $52.6 billion for January, this is greater than the $48.4 billion that was expected.

Price jumped higher in pre-market trading after non-farm payrolls and non-farm private payrolls surprised to the upside. That buying was quickly rejected signalling a possible top for the day. Its really too early to tell. With a pivot high at 1367 ES (June Contract ESM12) and then a lower high at 1365.25 ES, the 1365 level will need to hold as resistance this morning to expect any continued selling today.

Levels to watch today on the ES (June Contract ESM12):
Resistance above at: 1365, 1367, 1373-1374
Support below at 1359-1361, 1353-1355