Thursday, August 4, 2011

Market Technical View

Let’s get this out of the way; I do not give investment advice nor do I claim to be any sort of investment advisor, what you do with your money is your business and your responsibility.

So, with that here’s a look at the ES or S&P E-mini futures taken Thursday August 4th at 4:12 EST.  It is a daily chart and I have scribbled a few things for your enjoyment.
The solid red line running at an incline is simply a mean regression line of average price from March ’09 until today.  The thick black line below that is a trend line drawn from the low through the July and August lows in ’10.  This established a bottom for me to watch for serious failure or any oversold market conditions.  Notice that we have broken that trend for the first time in over two years.  May not be a big deal depending on your time frame but it is a big deal because something significant will certainly come out of this.
In trading futures I look at everything as an opportunity because I could cares less which way I trade.  Short is just as profitable as long and frankly the money is made quicker in short positions because failures are usually sudden and pronounced in an up trending market as is the case here. 
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Although we have broken this trend line it does not necessarily mean this market will collapse.  It very well could be that we get a nice correction and establish a new trend line or channel.  The next few days and couple of weeks will show us if that is to be the case. 

You will also notice another black line running across the top of the price and that is another trend line for the downside.  Together the two black lines form a wedge.  I like wedges because it is always fun to determine which way the break outs will occur.  Sometimes you get a ‘head fake’ in that the market takes a sudden move in one direction lasting but briefly then turns and with vengeance goes the other direction.  This has the effect of shaking out the weaker hands.  Stops a taken out, volume supporting the move declines and you’re off to the races without all the baggage of the weaker positions.  In futures it’s a zero sum game so once the losers are kicked out more potential losers climb onboard.  BUT, they won’t until the price action convinces them they are about to miss the boat.  By then it’s usually too late to realize any real profit unless they recognize what’s happening and stay the course.
The second chart is just a close up view of the same Daily but only running from December of 2010 until present.  Here you can clearly see the failure of the trend line.  Now I suggest that this trend line serving as a psychological support before this week will now have the same effect as a resistance over the next few days and maybe even weeks.  Should the price run up against this overhead barrier there will be a bidding war among traders.  Those bears will be selling hell out of it trying to keep price down and the bulls will buy trying to push price up.  This should really be fun and exciting except for one thing.  There’s a lot of money setting on the side and it is quite possible that the right people may “get the word” and turn on the money faucet to get this market running towards new highs.  That red dashed line I have on the close up chart is where I thing the most support will occur should price go that low.  It’s based on previous tops and lows plus a very strong price according to my harmonic Fibonacci grid (not shown).  That price resides at 1215.05.  At this time I see nothing from keeping the S&P futures from at least testing that price.  Right now it will struggle to break through 1259 on the up side and should it close above that the next target will be the 
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vicinity of 1270 on the way to test 1300 again.

Remember, new lows tend to produce further new lows and likewise new highs tend to produce further new highs.   Just consider your time frame as these patterns are fractal in nature.   
So, those are the scenarios as I see ‘em.  Ya puts ya money down and ya takes yer chances.  

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