ES Journal Archive (2009 - 2010)
- Thread starter Jahajee
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NQ and NDX at 1080 is the only reason the mkt is staying up.
A second opinion - sounds like the usual "if it does not go up then it will go down"
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The gap up this morning was short-lived and faded quickly, leading to marginal new lows in the major indices. Given the technical breakdown in the S&P 500 yesterday, an extension to the downside looks like it should be the path of least resistance right now, but there are several countervailing pressures that investors should be aware of.
After the Dow broke down below its November low on Feb 20, and given the dramatic sell-offs in the overseas markets over the past week (especially in Europe), there was a sense among market participants that it was only a matter of time before the S&P 500 followed suit by taking out its own November lows near 750. While the S&P managed to hold this key support level for 5 full days (2/20-2/26), yesterday's gap down and 4% drop represented a clear breakdown in this widely-watched average. Once this key technical support level in the benchmark S&P was breached, from a technical perspective this opened the door to a new leg lower in the markets.
However, there are a few factors that could make for some very whippy trading at these levels, despite the clean technical breakdown. First of all, the breakdown in the S&P was widely expected since the Dow had already broken down about 10 days earlier. Moreover, there was a palpable sense of gloom and disgust permeating the markets last week, which reached something of a crescendo during yesterday's sell-off. Most likely, what this adds up to is that the short side is a very crowded trade right now.
We've seen this type of pattern many times over the past year, and this type of scenario is ripe for a sudden, sharp short squeeze. While last week's sideways action in the S&P did alleviate somewhat its near-term oversold condition, there are many individual blue chips that never paused on their way lower and are right now extremely oversold. Couple this with the fact that despite Monday's ugly sell-off, we did manage to just barely hold another key support level, the psychological 700 zone in the S&P. (And curiously, the VIX "fear gauge" has not yet confirmed the new lows in the major indices by making new highs, although it got awfully close yesterday). In short, conventional wisdom suggests that yesterday's breakdown in the S&P, the almost complete lack of buyers in the market, and the palpable sense of gloom should lead to fresh lows in the major averages. This may indeed turn out to be the case, but investors should be aware that in the coming days it potentially won't take much -- a new headline out of Washington, a simple failure to make new intraday lows, etc -- to spark a sudden, sizeable short squeeze.
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The gap up this morning was short-lived and faded quickly, leading to marginal new lows in the major indices. Given the technical breakdown in the S&P 500 yesterday, an extension to the downside looks like it should be the path of least resistance right now, but there are several countervailing pressures that investors should be aware of.
After the Dow broke down below its November low on Feb 20, and given the dramatic sell-offs in the overseas markets over the past week (especially in Europe), there was a sense among market participants that it was only a matter of time before the S&P 500 followed suit by taking out its own November lows near 750. While the S&P managed to hold this key support level for 5 full days (2/20-2/26), yesterday's gap down and 4% drop represented a clear breakdown in this widely-watched average. Once this key technical support level in the benchmark S&P was breached, from a technical perspective this opened the door to a new leg lower in the markets.
However, there are a few factors that could make for some very whippy trading at these levels, despite the clean technical breakdown. First of all, the breakdown in the S&P was widely expected since the Dow had already broken down about 10 days earlier. Moreover, there was a palpable sense of gloom and disgust permeating the markets last week, which reached something of a crescendo during yesterday's sell-off. Most likely, what this adds up to is that the short side is a very crowded trade right now.
We've seen this type of pattern many times over the past year, and this type of scenario is ripe for a sudden, sharp short squeeze. While last week's sideways action in the S&P did alleviate somewhat its near-term oversold condition, there are many individual blue chips that never paused on their way lower and are right now extremely oversold. Couple this with the fact that despite Monday's ugly sell-off, we did manage to just barely hold another key support level, the psychological 700 zone in the S&P. (And curiously, the VIX "fear gauge" has not yet confirmed the new lows in the major indices by making new highs, although it got awfully close yesterday). In short, conventional wisdom suggests that yesterday's breakdown in the S&P, the almost complete lack of buyers in the market, and the palpable sense of gloom should lead to fresh lows in the major averages. This may indeed turn out to be the case, but investors should be aware that in the coming days it potentially won't take much -- a new headline out of Washington, a simple failure to make new intraday lows, etc -- to spark a sudden, sizeable short squeeze.
and a 3rd opinion --
It's TIME again for another TRADE ALERT in the Stock Indices.
The other day we told you about our last Sell alert on Feb 9th with S&P's at the 850 level. 3 weeks later the S&P's have traded as low as 700. At $50 pr. point in the E-mini that's a move of over $7,500 pr. contract.
As you may recall we also issued several highly accurate trade
Alerts in 2008 which called just about every significant market
top or rally high in the stock indices within a day or two.
NOW it's time for another comment on what might be a high
probability setup in the stock indices.
We have been very bearish on the market since late 2007 and still are. At this time we have good reason to believe, HOWEVER, that the market is positioned for a potentially explosive short
covering rally.
Based on our method, we are in an Area from where this should
happen within the next couple of days if it is going to
materialize. The 'official' pattern setup is not completed yet,
but we wanted to alert you to it so you can position yourself for
it.
Overall the market still has potential to work it's way lower and
possibly to the Dow 5000 level or S&P 550 to 600.
Will it go there in the next week? Well it could, but we don't
believe that is likely and this is not the time to push the short
side. A more likely scenario is for the market to stage a short-
term, short covering rally after which another sell opportunity
will probably present itself.
It's TIME again for another TRADE ALERT in the Stock Indices.
The other day we told you about our last Sell alert on Feb 9th with S&P's at the 850 level. 3 weeks later the S&P's have traded as low as 700. At $50 pr. point in the E-mini that's a move of over $7,500 pr. contract.
As you may recall we also issued several highly accurate trade
Alerts in 2008 which called just about every significant market
top or rally high in the stock indices within a day or two.
NOW it's time for another comment on what might be a high
probability setup in the stock indices.
We have been very bearish on the market since late 2007 and still are. At this time we have good reason to believe, HOWEVER, that the market is positioned for a potentially explosive short
covering rally.
Based on our method, we are in an Area from where this should
happen within the next couple of days if it is going to
materialize. The 'official' pattern setup is not completed yet,
but we wanted to alert you to it so you can position yourself for
it.
Overall the market still has potential to work it's way lower and
possibly to the Dow 5000 level or S&P 550 to 600.
Will it go there in the next week? Well it could, but we don't
believe that is likely and this is not the time to push the short
side. A more likely scenario is for the market to stage a short-
term, short covering rally after which another sell opportunity
will probably present itself.
For an explosive up move, wait for at least NQ double bottom in the daily. 
Long 692.75 again, targeting 705.5, and why not add some more in the 680's.
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