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.
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