The market is showing warning signs that a correction may be in the works, but there is no confirmation yet. Following last week's all time new highs on the S&P 500, market action has been negative. Today marks the third day in a row the S&P 500 is trading back below its 2007 high, but we have not seen a lower close on the ES since Monday's large sell-off. It is important to note the relatively high volume that has accompanied the recent selling. When you see a market at or near all time highs, you have to be weary when seeing selling pressure at high volume. Ultimately though, its too early to be overly bearish. There has yet to be a confirmed break in the overall up-trend on the ES dating back to last year and although there is increased volatility now, the selling has been more or less contained thus far.
A close below 1536 this week on the ES will help to confirm a bearish call looking forward, though there is still a good amount of support at numerous price levels all the way down to 1500 ES. For now I'm still a buyer at these support levels. As I keep saying, a correction could begin at any time, so obviously it is important to have a pre-defined exit strategy in place in case a trade goes in the wrong direction.
Levels to watch on the ES (M 2013 June Contract):
Resistance above at: 1567-1570, 1580-1582, 1589-1590
Support below at: 1536-1537, 1531-1532, 1521-1522, 1501-1502
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