Open the 60 minute candlestick chart of the March ES futures contract.
As you know, I maintain a small short position which (through quick scalping) remains about flat as of this posting. It seems obvious to me that we are at the top of a channel and about to head south. I see only two levels of support standing in the way of a trip down to 094. Those are about 111150 and 110275.
I note that we missed the top this morning following the consumer spending news. I suppose the gross miss on the GDP also contributed to a tame X-Mas rally. The technicals reflect that this puppy is puffed and ready for a throwback.
The rising pattern is very, very weak - completely unstructures and has a volatility diamond dead center. The RSI is clearly diverging over the last three peaks and the volume is rolling opposite to the price (meaning as the price declined volume increased and while price rose volume declined). These are signals to reduce long and shift short.
Let's see what happens today. Barring a breakout to the topside, I will ride my current swing to 094 - but due to the holidays, I will not add to my short position. I simply do not want to carry any stress into the weekend.
Good luck out there and Happy Holidays!
11 comments:
The housing data took us to my first support level - we have a bounce - which should be short lived on our way lower.
A great quote from Fuld regarding free money from the government to place aggressively optimistic bets in the market (right before Lehman Bros. failed) -
"It's paving the road with cheap tar. When the weather changes the potholes that were there will be deeper and uglier."
David, nice quote...Patience is the key here once again. I have a thought that the lack of seller at the moment maybe due to tax concern: investors in equity market don't want to realize the gain this calendar year so that they can postpone the capital gain tax to 2011. If so, Jan could be ugly as many will rush out to lock in their profit...just my thoughts as a former hedge fund controller
Merry Christman to you and your family. Thanks for sharing your knowledge all this time..
WW
Merry X-Mas ww!
David , First and for most Merry Christmas for you and all of yours !
Thank you for all the help you have given me this year.
I too an strangely unconcerned with this BS rally, Retail mom and pop trading is alive and well, The " I heard on the news ...... "
vix under 20......
We are ready , the train is coming
David , one more question , Have you ever seen a topping pattern like this , ?
Hey Payline,
Funny you ask, about a week ago I asked myself the very same question. Have I ever seen a topping pattern like this before. The short answer is no - not exactly - but more often than not, the top becomes very obvious once we start heading down! My guess is that we are going to consolidate in the rectangle for at least 1 full quarter. I think the range of the rectangle might be as low as 830 and as high as 1150 - but I reserve the right to review those targets as they are "off-the-cuff" in response to your question. I vaguely remember these levels from some analysis I was doing last month.
Also, we were very close to forming a diamond top - which is considered the rarest of tops - until these last 5 or six sessions.
I do think that there is very little upside room and probabilities favor price to the downside.
Still sitting with my small ES short position - looking for the swing down to 094ish.
Merry Christmas Payline!
check out this vedeo about broadening top...you might find it interesting
http://www.youtube.com/watch?v=iwXZc9B97Y8
Hey WW,
The broadening top formation that ran thru thanksgiving was the front half of the diamond that I refer to. You'll notice in the sessions that followed, we had the symetrical opposite occur - meaning the lows trended back up while the tops maintained their line. This created a diamond (though the diamond was not super symetrical - it shares the same behavior).
The fact the highs continue to drift up in low volume may or may not be significant to the broader pattern. This is why we must wait to see the break (up or down).
Thanks for sharing the link.
Have a very merry Christmas!
Amigos,
Feeling much better after accepting the facts. The christmasbreak gives me some q time with the people I do it all for :-)
Curious about the next moves of the big M and eager to get back in again.
Merry Christmas to all of you.
Anyone seen yahoo finance home page? The GBP/USD shows it is up almost 3,800%. Something is wrong.
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