Friday, June 29, 2007

Bearish shooting star

You gotta love markets. Everyday is different and brings new information and new challenges and excitement. What looked like a bullish certainity going into the Fed meeting, changed completely after 2 hours.

Firstly, the 120-min on NQ and ES is still on a buy, but is in a position to get rejected at the zero line, if we selloff tommorow.

The bearish shooting star pattern appeared on the NQ at two different timeframes (120-min and the daily charts), which is pretty ominous. For this bearish pattern to confirm, we need to open Friday around the Thursday's closing levels (or even better gap-down) and selloff the rest of the day ending in a red candle. That would confirm that it the rally from ES 1492 was a 2 day wonder and the next downleg has begun. Anyway, i preferred to jump the gun and took a stab at a short here around NQ 1958, since the risk/reward is so good. Not to mention that i closed all my longs at the close. A hourly close above NQ 1968 will stop me out and also keep the bullish structure intact. Call me a bear for today !

We'll see what Friday brings.....

Thursday, June 28, 2007

Going into the Fed meeting....

The crescent shaped selloff did mark a bottom of some sort after all. Now the question is "Is the rally sustainable ? ". Before the Fed meeting the technicals have decided what they want to do going into the Fed meeting. Now the real question is "Are those positioned based on these technicals right or wrong ?"

Two charts which are self explanatory.

We are coming out of a very complex bottom on the ES (the complexity which i had not seen in a while). The level of complexity suggests a near vertical rally without any meaningful pullback IMO.

120-min buy signal

Wednesday, June 27, 2007

That crescent shaped selloff

That crescent shaped selloff on the NDX is a classic climactic selloff signature. In percentage terms that was no climax, but nevertheless the signature has the characteristics of a climax.

As i noted yesterday, my ES target of 1492 was hit today morning. What is more significant here is that, while ES took out the 6/8 lows, NQ is still holding above it. If i were a bear here and if i see a doji on the hourly candle, without NQ taking out 6/8 lows, then i would be scared - very scared !.

If NQ takes out the 6/8 lows and ES breaks below the 1490-92 support, then a much deeper selloff should be expected. Otherwise, we should make an important low today !

Tuesday, June 26, 2007

Heading into a climax

As i said yesterday, based on the Nasdaq fishhook, we were probably headed into some sort of a selling climax. Seems like they sucked in a lot of bulls yesterday. As i mentioned yesterday, ES 1490-92 was my VST target. We should hit that target tommorow morning. Now how deep the climax is going to be is the multi-million dollar question. If 1490-92 gets taken out, then a deeper selloff somewhere into the ES 1470 area is the next expectation.

Trade safe.

I am torn...

I am torn between the bullish and bearish view here. I was of the expectation that we are headed to new highs in the ST term. I can no longer envision such a scenario with confidence, given what the internals are saying at this point.

The NSYE summation index is now making a trip towards the zero line. The Nasdaq summation index has formed a fishhook and was rejected from the zero line, which means we are probably headed for some sort of climactic selling. I don't have any downside targets yet. The break of ES 1510 pivot means we retest the ES 1490-92 area in the VST term. Also the 5% and 10% components of the NYSE and Nasdaq MCOs are now below the zero line, confirming the IT downtrend.

The lack of selling pressure in the Nasdaq is quite disturbing here. Given that it's internals are worse than NYSE, it still holding better than the SPX. I don't know whether to intrepret this is bullish or bearish. Internals are clearly bearish, but the price action is bullish.

As i said i am torn between the bull and bear camp. I will try a short trade on NQ today (went short NQ at 1945). Even if we trade above 1958.25 for a tick, i will be out and will switch back to the bull camp. I have been a good fade the last one week. Trade at your own risk.