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.
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Just a quick comment on the current action. We are below my key level of 1385 on the ES. There has yet to be any sign of buying enthusiasm. I am very bearish right now. Need to see EOD rally and close back above 1385 to change that. in reality, ES needs to trade back above 1400 and stay there before I can get too excited about the long side again. We'll see... 1340 could be next target on the ES if these current lows don't hold as support
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