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Yesterday's bullish reaction in ES is mainly due to the short covering. The bulls subsequently spreaded out over the prior high by 3 ticks to run stops squeezing the shorts. However, there is no new buying coming in the market at this price suggesting weakness that price is a bit over extended.
Based on this information, my primary hypothesis is that the ES is range bounding and it is likely to come back down to test the other side of the trading range.
As a supporting evidence, NQ is substantially lagging behind ES that it is not even able to take out the weekly value high yesterday. On the other side of the range, there is a weak bottom forming at the 7420 level that it is going to act as a magnet drawing price lower.
Can you help answer these questions from other members on NexusFi?
It is difficult to write anything when a baby is crying incessantly in the background.
But I am just going to write it. It is a test of mental toughness, i know.
Today's ES has traded in a tiny 10 points range. The buy zone appeared around 16:10 was easily identifiable. However, it then trapped inside of a chop zone for a solid 30 mins without hitting my second target. Hence the second portion was taken out leaving only one runner in the market. After 30 min, it finally shots to the upside hitting the target 2 eventually. Be it just with one contract.
It is interesting to see a divergence between the ES YM group and the NQ RTY group that the latter group are clearly under pressure. The Russell is clearly in a down trend that it is not to test 1700 key level. If no strong reaction were to be found, the path of least resistance would be to the down side.
1. Dollar is still hovering just above 94.40 after a whole day of doing that yesterday. It is almost as if it want to attract people's attention by saying one sentence over and over again: "pay attention and have a guess on what I am going to do?"
2. From the price action in euro yesterday, I have to conclude that the Euro is well supported that the prior week's value high, 1.1735 print, has been defended twice. Without breaking that level, there can be no decisive down side move. Hence I am going to coming into this session with a bullish bias and looking for another leg higher in Euro towards 1.1860 level. The break down of dollar from the 94.40 support would fuel such a move in Euro.
3. after closing down my computer yesterday night, I have suddenly understand what the divergence in ES/YM and NQ/RTY means. The money is moving out of the high beta sector and moving in the blue chip low beta stocks hence popping up the ES and especially the dow. This is a sign of the end of bull market as the investors have become more risk averse and are seeking havens to park their money. But if the NQ were to recover in the coming days as the EM are coming back nicely, it is possible that we would have another leg higher in the risky stocks, namely the NQ. But that would be the last thrust to the upside. After we would have a slow grinding down making lower lowers and lower highs in the coming few years.
The down moves in Crude are actively bought by the speculators thus forming a triangle formation.
I didn't draw a down trend line on my chart yesterday hence missed the break out yesterday afternoon after the NY open.
Have to say that down trend line break out is such a simple but reliable technique that I should use more often.
I have learned this one from Steven Spencer from SMB capital that he uses the down trend line break in momentum names extensively. At the beginning i didn't pay much attention a lot, because DAX chart is too messy for it to be effectively. But if you apply this technique on ES, NQ, CL, Kiwi and Pound, oh, boy it works!
Due to some unscheduled administrative work, I was not able to write the pre-market prep.
Moreover, the pre-market was unusually busy that I have trades in CL, NQ and ES, all over the places.
Just want to show you the power of simple trend line and how it can be used to help your market timing and entry.
Note that this technique is only reliable when the market is bullish like today! Then you can either long after the break out or enter at the retest.
Another trend line break.
Trend is a trend line if there is at least two touches, which means the down move would have to be in at least two legs.
If the move is in piece to the down side, then the trend line break is not reliable.
1. The Dollar index has finally broken the 94.40 on Friday afternoon and flushed below 94.00 to run stops. Technically, the minimum down side has been achieved by the 127.2 extension of the first impulse down leg. Hence we should at least scale back our bearish bias. A possible scenario is for it to reach the 78.6 retracement of the whole down move completing a Cypher pattern.
Notice that there is a double top weak structure sitting just at the 61.8 fib of the whole down move. That weak structure, or, more precisely, the stops hiding behind that double top, is very likely to be in the crosshair of the market maker. We are carrying this scenario forward next week and hunt for setup trades in the direction of that hypothesis.
2. The euro is potentially forming a head & shoulder pattern just above 1.18 level. If this head shoulder's pattern were to break to the down side, then we are going to trade the Euro on the short side. Because that directional bias is in line with our above hypothesis that the dollar might be retracing higher aiming at the 78.6 fib level of 96.20.
