Exited Long Position Though Market Remains Bullish

Exited my long position (ES U-13 at 1689.75) just before the close of Futures trading this afternoon. I'm not bearish here, its just the odds of holding for more gains do not necessarily out-weigh the odds of a pullback. The ES has moved up 30+ points with hardly any selling since the highs last Friday (9/6/13). The 6th was a shakeout day and the fact that the bulls won suggests that even higher highs are likely in store. While we may get those new highs, the ES is hitting some good resistance and could sell down a bit from here. I may choose to re-enter my long position in the coming days depending on price action.

I am watching the 1657-1667 range (price refers to the ES Z-December contract currently trading 6 points lower than the ES U-September contract) now and will likely buy any pullbacks to that price area.

A close below 1657 (ES Z 13 contract) would turn me bearish and suggest a move back down to 1600 would come next. I don't expect that to happen in the near term, so I favor buying the dips at present.

I will be looking for short entries if the ES (Z December contract) trades up to 1730 in the coming week(s).

This is my speculative view looking forward, we'll see how the price action plays out...

Market Getting Frothy

By frothy, I mean that the market is overbought and is approaching price levels that could be very favorable for short positions. The S&P 500 has moved up almost 50 points since I exited my swing long position almost a month ago. There have not been any solid opportunities to enter another swing position since, and as such, I haven't posted any new trades.

Market has been very bullish and remains bullish, but I will be eyeing the 1717-1727 range (ES U13 Sept Contract) for a potential swing short entry. It depends on the price action, but if the ES gets up there before the end of the week, I will likely be entering a short position.

If I do enter any trades, they will appear in the "Trades" section in the right column. I may not be posting as much lately, but I'll still be publishing my swing trades...

New High Rejected on the First of May, Might It Be Time to Go Away?

We got the rally higher that I expected, it just happened a little quicker than I thought. The latest new high on the ES (M June 2013 Contract) came in right at the 1595-1596 resistance I noted in my last post. From there markets sold off and, yes, it happened to be the 1st of May. I am beginning to entertain a more bearish stance from here and prefer selling rallies right now. To maintain this bearish outlook, the 1588-1590 (ES) resistance needs to hold in the short-term. This level also makes a nice price to consider entering a shorts if you're not already short.

I'll be watching the the market reaction following this morning's ECB rate decision (7:45 am EST). If the market reacts positively and closes the day strong, I'll reconsider my preference to sell rallies.

In any case, I'm speculating that the time to sell the markets "May" be upon us. Today's action will be important in establishing a market bias looking forward.

Levels to watch on the ES (M June 2013 Contract):
Resistance above at: 1583-1584, 1588-1592,  1596-1597, 1607-1608
Support below at: 1569-1571, 1562-1563, 1551-1552, 1539-1540

GDP Disappoints, Fed Minutes Offer no Surprises

GDP came in on Wednesday morning at a significant miss of expectations showing that the economy weakened in the fourth quarter, with a minus 0.1 percent annualized pace.

FOMC minutes reveal the Fed's point of view with no surprises:

• Growth in economic activity paused in recent months
• Inflation has been running somewhat below the Committee’s longer-run objective
• If the outlook for the labor market does not improve substantially, the Committee will continue its purchases of Treasury and agency mortgage-backed securities, and employ its other policy tools as appropriate, until such improvement is achieved in a context of price stability
• The exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee’s 2 percent longer-run goal, and longer-term inflation expectations continue to be well anchored
• Voting against the action was Esther L. George, who was concerned that the continued high level of monetary accommodation increased the risks of future economic and financial imbalances. 

The thing that is genius about Bernanke and the Fed is that they have mastered the rhetoric which describes their policies to influence the markets in a positive way. Continued loose monetary policy is bullish for the markets and even the idea of tightening monetary policy can be viewed as bullish because that would mean employment is up and the economy is recovering. Fed minutes will likely be a non-issue for a while as the market already knows what to expect looking forward. Of course any surprises would certainly influence the markets, but expectations for now are that there will be no surprises.

I am officially bearish in the short-term. I believe 1506 on the ES is the short-term high (which happens to be right in the middle of my resistance range from the last post). I will now be looking to short any rallies. I'm looking for a bounce off the 1495 level on the ES and will look for shorts between 1500 and 1504. Consider stops on any shorts if the ES confirms a move above 1512. First target to the downside is 1487-1488 and second target is 1479-1481. I will consider longs again if the 1480 support holds.

Market Extended. Expect Pullback

The ES (E-mini S&P 500) is up almost 120 points in less than a month and in that time the two largest declines were from the high on Jan 4th for 17 points and from the high on January 11th for 14.75 points. The market is extended and is due for at least a small pullback. The ES is testing the 1500 level while the S&P 500 cash index has already closed above the psychological level. I like shorts up around the 1500 level on the ES, though there is a good chance we see a pierce of that level. We'll see how price action is this morning. I will post in the comments if I do take a short.

While I am speculating that we are due for a correction to begin this week (at least a small one), markets remain bullish and we need to see some confirmation before gaining confidence in the trade. When aggressive, or entering a trade early, I want to see the trade go in my favor quickly. If it does not, I will exit the trade before experiencing any significant heat. Bottom line is to plan the exit strategy beforehand based on different price action scenarios, that way emotions don't come into play and I know how to respond ahead of time.

In any case I am anticipating a downturn and I have listed some of the reasons why below:

• Market over-extended without seeing any significant pull-back.
• Unrest in the middle-east. Riots in Egypt could be the pre-cursor to an "Arab Spring II."
• The market may be moving in the opposite direction as Apple right now, but that is likely to reverse.
• The Nasdaq index is showing signs of fatigue, much of it to do with Apple, but it has to at least be considered as a potential leading indicator.
• FOMC minutes to be released on Wednesday. If there is any mention that quantitative easing could or should end early, that will provide an excuse to sell this over-extended market.
• Other news releases this week to be aware of, GDP on Wednesday, Jobless Claims on Thursday and Employment Situation on Friday.
• Lets not forget that while the stock market may be at levels not seen since before the recession began, the employment situation has only managed to regain half the total lost jobs. That math doesn't quite add up and leaves room for concern.

That's it for now, lets see how this week begins. I will be looking for short opportunities as the ES makes any new highs. If trading multiple contracts, easing into a short trade here in the upper 1490s isn't a bad idea either.

Levels to watch on the ES (H, March 2013 Contract):

Resistance above at 1499-1501, 1505-1506, 1509-1510

Support below at: 1491-1492, 1486-1487, 1479-1480, 1470-1471

Low Volume, Low Volatility, Higher Highs, As Expeceted

The year has begun much as anticipated with low volume and small price ranges throughout the markets. Price continues to churn upward, even if the pace is gradual and the gains minimal. This morning marked the largest price move relative to time (ES jumped 8 points in 30 minutes on new jobless claims data) that we have seen since the first trading day of the year.

Since 2013 began with a gap-up across most markets, the ES has been consolidating in a slight upward trend making higher highs (highest prices since 2007). I expect continued higher highs before the markets eventually turn down to test the 2012 closing prices.

ES (March Contract): up-trend denoted by yellow lines. Previous multi-year highs denoted by white lines.

You can see that with today's rally, a potential short opportunity is presenting itself. I like shorts in the 1480-1482 price area (potential for a pierce higher). You could look for a move back down to the bottom of the range, but I'll probably look for about 10 points on that short.

Consider long entries on a pull-back to the 1468-1472. From there I like the up-trend to continue and will expect 1490 ES (H March Contract)

So my bias remains bullish and I favor buying the dips. My bullish bias will change when we see another wave of fear enter the markets.  This will happen when debt-ceiling talks command attention once again (at some point in February).  Any contention between congress and the white house will result in at least some short-term selling across the markets. This is likely what will bring index prices back down to test the 2012 closing price levels. I will talk more about this in due time.

Rally Off Lows Now Hitting Resistance

As I said would happen in my previous post, markets rallied right into the Thanksgiving holiday. More buying  pushed price even higher during Friday's shortened trading session on low volume. This morning it looks like Markets will open a little lower, having given up Friday's end-of-session gains. 

I would be comfortable selling any rallies from here (ES currently trading at 1400).

Resistance above on the ES (Z December Contract) at: 1402-1403, 1406-1407, 1413-1418.

If the ES does continue higher and trades as high as 1418 without pulling back first, consider it a gift-wrapped short opportunity.

This market will pull back, and as cliche as it sounds, continued talks regarding the Fiscal Cliff should provide the catalyst. 

Support below on the ES at: 1393-1394, 1387-1388, 1375-1377, 1365-1367.

The next best buying opportunity will be a move back down to the mid 1360s. From there look for the rally to continue into the end of the year. That's what I'm looking at for now, we'll see what the price action tells us from here...

Levels to Watch in Terms of Buying a Dip

The S&P 500 is showing a classic bull flag pattern right now as we consolidate here between 1456 and 1459 on the S&P Cash Index. There is support directly underneath (1450 on the ES Z December Contract for Futures) which makes this very tempting to buy if you are not long already. At the same time there is risk of taking heat on this trade if the bull flag pattern fails. Still a good long depending on how much heat you are willing to take.

Next support levels to watch on the ES (Z December Contract):
1448, 1444-1445, 1441-1442

These are all potential levels to buy (the dip), but if the ES manages to sell down to 1441-1442, that will be a very attractive level. Can't count on that though, we'll have to watch and see how this plays out.

The other option is that support holds at today's lows and the ES rallies up another leg from the current bull flag.

Weakness Continues With Disappointing Initial Jobless Claims Number

Market remains under pressure. Initial claims came in at 359,000, which is trending down, but was higher than revised expectations of 350,000. Market has maintained weakness as a reaction and remains under pressure.

ES will likely trade down to 1377-1381. ES should find support there and that price area will be a good long candidate. We'll have to see how much buying can come in at that point, but I expect that the market will rally from there. As was the case yesterday, it is best to wait for confirmation of support before taking a long entry. There is definitely a change in market behavior of late as buying the dips is no longer as easy as we have been accustomed. There is much more contention between buyers and sellers at support levels now.

My expectation is that the official downturn has not yet begun, though the recent move to the high of 1419.75 is a potential topping pattern. The uptrend is still intact however, and until this is not the case, I remain biased to buying the dips.

Currently looking at key support at 1377-1381 ES

If that support does not hold, the next level to watch is 1369-1370 ES. I would be a confident buyer there.

Weakness To Begin The Day Presents Another Buying Opportunity

We begin today's trading with weakness again as the ES has sold down 10 points overnight following losses in Europe and Asia. Weakness may be in response to BHP Billiton suggesting iron ore demand in China is slowing.

We are seeing solid support hold up so far just above the highs from 3/14 and 3/15. Most of this year my bias has been bullish and this means I have favored buying the dips (as I frequently say). This morning is one of those opportunities. If you were, or are able to get a buy entry in the 1395-1395.50 range, it allows you a low risk opportunity to the long side. There is a decent reversal pattern off the low of 1394.25 which allows you to use a small stop at or just below the low making your risk to reward very favorable. If you get stopped out, you can always get long again if support holds and another reversal pattern emerges.

I'm Long ES at 1395.50. First target 1402. Will consider exit if ES trades below 1395, can always get back in long when support confirms.

Levels to watch today on the ES:
Resistance above at: 1401-1402, 1408-1409
Support below at 1393-1394, 1387-1388, 1384-1385

Quick Thoughts This Monday Morning

Markets showing a little bit of weakness this morning following last week's move higher. Not much to say here other than to maintain my preference of buying the dips. We have been experiencing relentless bullish action over the past three months. As long as the price action continues to confirm it, I'll continue to expect it.

Looking a little further ahead however, I will be watching the 1440-1450 range. If the ES trades there in the next week or two, I like shorts and will expect a pullback to at least 1400 from there.

Levels to watch today on the ES:
Resistance above at: 1400.25-1401.25, 1403.25-1404.25
Support below at: 1394-1395, 1388-1389

Selling Pressure Picks Up Overnight

US Futures lower this morning as we are seeing continued bearish sentiment in Asian and European markets overnight. Selling pressure has been steady, price has not rallied off of support all evening. This is different from the norm of late as usually we see buyers step in fairly quickly to rally price higher off key support levels. The ES has been consolidating in the 1352-1354 range throughout the early morning hours.

I do believe we should see a bounce higher this morning off the 1350-1352 support, though a pierce lower is always possible. I am looking for a move back up to 1358-1360 on the ES. It will be interesting to see if buyers will have enough conviction to push the market higher than that, but it will certainly be an area to consider a short entry for a move back down to the lower 1350s.

So even amidst the current weakness, I like longs in the 1350-1352 area on the ES and like longs even more around 1345. Selling pressure or continued consolidation may persist for a little while after the opening bell, but eventually I expect buyers to move price higher. I will consider taking profits on any successful long entries in the 1358-1362 range. This is my tentative outlook heading into this morning.

ADDITIONAL NOTE, 9:28am EST
Wait for support to confirm before taking long entries. 1250-1252 did not hold. Very heavy selling pressure coming in. Must proceed with caution. I will try and post additional notes in the comments.

Levels to watch today on the ES:
Resistance above at: 1360-1361, 1365-1366, 1369-1371
Support below at: 1350-1352, 1344-1346

Better Than Expected Employment Numbers Pop the Market Higher

I have not been posting much of late because the market has been dull. The release of the employment numbers this morning changed that, at least for the moment. The ES jumped 14 points higher as non-farm payrolls increased by 243,000 versus an expected 155,000, private payrolls totaled 257,000 versus an expected 168,000 and the unemployment rate fell to 8.3% from 8.5%. This was enough to put a bid under the market.

There is plenty of resistance here in the mid 1330s on the ES and I'll be expecting a little bit of selling to come in. I'll look to take profits on any shorts around 1330-1331 and will consider longs again from there. In fact, 1331-1336 may prove to be a nice trading range to buy the lows and sell the highs. We'll have to wait and see the price action conform this once the ES does trade down to 1330-1331. I'll post in the comments if my thoughts change on this idea.

My Initial Thoughts on What to Expect in 2012

Hope everyone had a nice holiday season. I'm finally back with my first post of 2012 where I will summarize my thoughts on the current state of the markets and what I expect looking forward.

Buy and hold is dead, but expecting a double dip decline is also foolish. There should be plenty of opportunity this year as both a bull and as a bear. Expect continued volatility as the year unfolds.

RIGHT NOW:
There is major resistance overhead and I am bearish. The Dow and the S&P 500 have not yet signaled a return to bullish sentiment (technically) since the sell-off began last August. The fact is that the first week of August 2011 signaled a break of two major bullish support trend-lines. That introduced the beginning of a bearish cycle. Yes, the immediate trend is up when you look at the higher lows dating back to the early October pivot low, but the markets are hitting a wall overhead right now.

Action in the US dollar supports this view. The dollar is showing strength and is poised to move higher. A lot of this strength is in relation to a weak Euro, but regardless, a rising dollar is not good for US equity markets.

The UUP has already broken out above prior resistance. I expect it is on its way to 23.25-23.50.

The EURUSD has now broken down below prior support. I expect EURUSD is now on its way to 1.25. Resistance above needs to hold at 1.283-1.287 for this to confirm.

The dollar index ($DXY) has not yet confirmed a breakout. It is currently sitting just below resistance at 81.30-81.45. When the $DXY closes above 81.45, that should be confirmation that the dollar is indeed headed higher and that US equities will head lower.

Although there is significant resistance overhead in US equities, that doesn't mean the market is going to bounce off and go straight down. Any good short opportunity will typically prove difficult to take advantage of. It is only normal to see fake-out moves to the downside followed by reversals to the upside. This is when the weaker hands get shaken out. You can already see this happening as the markets have chopped up and down over the first week to begin the year. I wouldn't be surprised to see more consolidation before the market declines. Regardless I prefer selling the rallies right now.

LEVELS TO WATCH:

Key Resistance on the ES:
We have the double-top from 10/27/11 at 1283.50. ES came close to that on Friday trading up to 1282.25 following a positive unemployment number.

Bearish outlook still in play even if this double-top is broken.

Next line of resistance is 1291-1295. This price range could easily be tested. I especially like shorts in this range. 1290-1300 ES is very significant and will act as a formidable wall against higher highs. Any price action above this range will need to be immediately rejected for bearish confidence to remain in play. If ES trades up into that price range, I will be looking to enter a swing-short position with confidence.

In terms of support on the ES, once the ES turns down, expect a first target to the downside at 1249-1252. I'll wait to see the timing of this move and the subsequent price action before I give further levels to the downside.

There are fundamental economic concerns across the globe that support the technical bearishness I have outlined above.

First of all, the Eurozone debt crisis has not gone away. Greece is likely to leave the Euro without less stringent austerity measures. A solution to pay off Italian, Spanish and other PIG countries debts are nowhere near being reached. Pyramid debt instruments like SPVs, EFSF bonds and other newly created schemes have failed to lure in more money. High yields remain a problem in the Eurozone. Central banks continue to resist the temptation to print more money (at least that is the attitude they express publicly). If they don't print and European leaders do not find buyers for their bonds and other debt instruments, deflation will prevail and equity markets will decline.

Debt Ceiling will be an issue again here in the US as the government is now less than $25 million away from hitting the revised number from August of last year.

Tensions mounting with Iran. If the US, Israel or NATO invades Iran, oil prices will go up. If oil tankers were prevented from passing through the straight of Hormuz, oil prices would sky-rocket and equity markets would sell in the same wave of panic.

Interest rates are as low as they can go in the US, even lower than they were following the 2008 crash. There is no more room to lower interest rates further if/when times get tougher.

With all the bad news in 2011, the S&P 500 is only 75 points off its post 2008 highs. I would lean towards the attitude that positive US economic news like declining unemployment numbers and increased manufacturing numbers are already priced into the markets. Without more QE, further upside is limited while the downside potential is ripe for the picking.

We are currently experiencing the greatest debt bubble in history. I can't say exactly when this bubble will officially burst, but you can't grow an economy on credit forever and you can't continue to increase debt without suffering consequences at some point. Will the debt bubble burst within the next year or in the next 10 years? I don't know. Predicting economic events is not the hard part, it is getting the timing right that is difficult. All we can do is trade the "now" and hope to be in good position to take advantage of future market moves and not get caught on the wrong side of disaster.

To close, I want to touch on how bad things could get this year. Assuming the bearish action does play out in the first half of 2012, I don't expect significant escalation to the downside. The worst case scenario would be around 950 on the S&P 500 (don't get me wrong, that would be significant, but it would be unlikely for things to get worse than that). If price was to fall that low, it would provide a tremendous buying opportunity. When things get bad enough, central banks will resume some form of QE or money printing that will put a floor underneath the markets. Lets not forget this is an election year in the United States. The Obama administration knows that a healthy stock market will increase the likelihood of a second term in office. They will do everything in their power to ensure that is the case.

I will conclude this post now before it gets too long... more to come... best of luck to all as we enter what will most definitely be an interesting year.

Where to Look for Support

Market is in sell mode now after seeing a rally in the after hours session. The brief but significant rally was in reaction to news that the ECB loaned banks a combined EUR 489 bln at its 3-year long-term refinancing operation (LTRO). That was well ahead of expectations, which were closer to EUR 300 bln. The positive reaction was quickly reversed and the negative sentiment has continued this morning.

There are two support areas to look for long entries today. The first one is 1222-1223 ES and the second is 1217-1218 ES.

Only considering quick trades or scalps if the ES doesn't trade that low.

Price Levels Beginning to Look Attractive for Long Entries, But Slight Lower Lows Likely

We got the lower low that I was waiting for on the ES, though the SPY hasn't quite filled its gap from 11/29 (about 1190-1191 on the ES). The ES is now flirting with what I expect to be the lows for the remainder of 2011. That being said, there is no sign that the lows are in yet. I think a better long entry will come between 1185-1192 on the ES. From there I will be looking for about 30-40 points to the up-side. EDIT: SPY actually did fill the gap from 11/29. I meant that if you look at the chart in terms of the ES, the closing price on 11/29 is at 1190.

The bigger picture is still looking bleak. Mario Draghi and the ECB have been reluctant to fix the Euro Debt situation with more money printing. This is basically the same as saying that the acceptable alternative is deflation. Draghi has made it clear that he prefers finding a solution to fund the EFSF in order to pay off debt for countries like Italy, Spain and the other PIGs. The problem is, there has yet to be a viable proposal as to how to make this happen. The result has been obvious; the Euro has sold off, the dollar has seen a bid as a safe haven alternative and Equity markets around the world have declined.

We will eventually see some form of money printing in my opinion, but things might have to get worse first. Central Banks understand that printing money will be frowned upon and viewed as a catalyst to inflation. It will likely send the prices of gold, silver and commodities through the roof. So, when they do print money, it will be a clandestine effort.

In any case, I think the markets are due for a bounce into the end of the year. I like longs at 1185-1190 ES.

ES Has Begun its Move Down to 1217-1223

That being said, I believe there is potential support here around 1237 on the ES. I like Longs from here. I would like to see a rally back up to 1255-1260 before the end of the week on the ES. From that point I will like short entries and will anticipate a move down to the lower 1220s.

If the ES hasn't yet bottomed here at 1237 (today), I like support to hold at 1232-1233 and like longs again from there. If 1232 doesn't hold, then the selling will continue. If you are not already short by that point, then the best bet is to wait for the next best long opportunity around 1217-1223 ES.

NOTE: I am referring to price on the December Contract ESZ

First Target Reached, Anticipating the Next Move...

First target of 1198-1200 ES reached. You can see how that area has acted as pretty good resistance. The ES has traded down almost 10 points off that price area 4 times now.

I expect that my second price target of 1218-1220 will be reached next. The key is choosing the best price point to look for long entries to try and catch this move. Ideally, an opportunity will present itself to enter long down around 1178-1179 assuming the ES trades that low. I will of course be careful defending long entries. Keep in mind, a daily close below 1171 will likely send the ES down to revisit the lower 1150s.

I will consider short entries at or above 1218-1220. The key is to wait for a good short entry signal. Maximum upside potential (in the next 5 trading days) according to my analysis is at 1245. I don't think we will trade that high, but it is possible. As long as we don't see a daily close on the ES above 1231-1232, I will like shorts at those price levels.

IN THE NEWS
Even though the market is up, there continues to be a lot of negative news.

• As final details of the EFSF come out, it is clear that it is not the solution to avert a crisis in the European debt situation.
  
• There are talks of a contingency plan to dissolve the Euro.
  
• Global GDP is declining while debt burdens become untenable.
  
• Standard & Poor's cuts ratings of Bank of America, Goldman Sachs, Citigroup and many other banks.
  
• Today, for the 4th time, the ECB failed to sterilize its ECB bond purchases. The ECB said that 85 banks bid a total of EUR 194.2 bln for seven-day term deposits. It had aimed to drain EUR 203.5 bln.
  

The reason I expect further upside amidst the negativity is because the market is expecting a plan to recapitalize the banks and to make sure bond interest rates don't spiral out of control in Europe. Whether money comes from the IMF, the ECB, the Fed, China or somewhere else is not important. Whether or not it actually happens is not important. What matters in the short-term is what the market expects. For this reason as well as for technical reasons, I expect we will see further upside in the market. As always, only time will tell...

Italian Bond Yields Continue to Soar. Markets Sell-Off

10 year Italian bonds now trading at 7.34%. The 3-10 year yield curve on Italian bonds is now inverted. Inverted yield curves almost always precede recessions. Contagion now has Spanish yields trading almost as high as 6%. Money has moved into the US dollar and US treasuries as their safe-haven status continues to be applied. Futures are gapping down significantly this morning.

Amidst this negativity though, it looks like a nice buying opportunity is presenting itself. I like long entries in the 1238-1240 price area on the ES. Be careful defending any longs if price goes below 1236 ES.

Market Outlook Looking Forward

European situation ugly:

Finding the proposed $1 trillion Euros to fund the EFSF is in doubt. China would have the ability to make it happen, but there is no sign yet that they will commit to buying the EFSF bonds. Other Sovereign States and the Private sector could also contribute, but it remains to be seen how or who will finance the bailout fund. This does not even take into account that everybody knows the proposed $1 trillion is not even sufficient.

Italian bond yields continue to rise. The ECB hints at ending the purchase of Italian bonds if the Italian government does not do its part in promised budgetary reforms. Italian Prime Minister Silvio Berlusconi in jeopardy of being forced to resign. Portuguese, Spanish, French and Belgian bond yields also rising.

Unemployment continues to be a concern in the United states:

Unemployment fell in the US by .1%, but still remains over 9%.

U-6 (Total unemployed), plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force is at 16.2%

US employment is actually lower than it was 10 years ago

US Wages are rising slower than Core Inflation

Although the US labor force rose by 181,000 last month, the overall situation does not look great as the world economy is in a funk. I don't know where the employment opportunities can come from to put any significant dent on the current unemployment rate.

Amidst the negativity however, stocks are holding up well. Market has not yet seen a significant move to the downside following record gains in the month of October. It appears the October lows will hold up as support into the end of the year. Without significant new negative developments out of Europe, any dips will be buying opportunities throughout the remainder of 2011.

Right now:
Until price on the ES can confirm above the current 1258-1262 resistance, I favor the short side. We have up-trending support at 1220 ES which has been tested 5 times in the past month. I expect that a sixth test of this support (currently 1218-1223) will not hold. Therefore the next best long opportunity will present itself in the 1180-1190 range on the ES.

In terms of resistance above, I am watching the 1258-1262 price-area to begin this week. If buyers can move price through that, I like longs from there as price should move up to test the 1267-1272 resistance and then up to the previous highs. The best short opportunity will come if ES trades up to 1290. I will be looking to get short at the first test of this 1290 resistance. This should provide a minimum of a 40 point short play. Depending on news out of Europe, we could see a further move to the down-side. We'll have to wait and see.

To sum it up: I am slightly biased to the short side in the immediate-term. I expect a choppy market until the ES either trades up to 1290 or down to 1180. I will be a confident buyer down in the 1180s and will be a confident seller at the first test into the 1290s.