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