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
Monday, July 30, 2012
Tuesday, July 24, 2012
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
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
Monday, July 16, 2012
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
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
Monday, July 2, 2012
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:
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.
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.
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