Sunday, September 11, 2011

Re-enter the BEAR - 12 Sep 2011

Last week's action in hindsight was nothing short of a sucker rally... When the US markets opened on Tuesday after Europe's >4% drop the day before, it gapped down and revived a strong rally that lasted till Obama spoke about the Jobs Bill two days later. Benenke's Fed Beige Book speech did little to rattle the markets but Obama's speech might have sparked off a little of a market turn.

Here brings to mind something one of my trading teachers posted on his wall, compliments to Conrad Alvin Lim:
"That's a Jobs Bill? I know a Jobs and a Bill that could come up with a better plan that you, Obama. And together, their combined wealth could bail out America. Plus their companies could provide work for more Americans than your Jobs Bill!!"

By Friday, it seemed that the market was not very committed in turning over... as we (singaporeseeds aka Jimmy and myself) were discussing, transglobally through Viber, that the market needs to end down on Friday for all the downtrend to continue and be intact. Although we saw the need, we couldn't see the spark to light the fire. Was it to be a 9/11-like event, perhaps?
Fifteen minutes before the US market opened, about 4.15pm European time, news broke officially that Juergen Stark quit his post as an ECB Council Member. This sparked of worries about the internal conflicts within ECB and the Greek default that may follow.

The markets sold off big time.

Below is the technical outlook and what appears to be in for this week...

The daily ES chart is showed Sell Signals that were at some point low in probability... however, Thursday and Friday's action validated those sell signals and an impending MACD bearish crossover in bear territory is telling of the week's worth of action. IF we do get a down close on Monday, it would be another DFDM (Down Friday, Down Monday).

The 30 min charts show how the market turn came about... The strong mid-week rally went flat and the 55/89EMAs rolled over, with price falling and failing the test. As mentioned earlier, it was about 8am ET that we were conversing about the continued down close on ES when the charts looked non-committed. However, 30 mins later, it was clear with the news release and the ES price moved and kept below the 200MA.

Am expecting a follow through the early part of this week.

I happened to be testing my FX Intraday system as well during this period, and by chance, noticed that the EUR/USD is now leading the indices. Clearly, this is so as the main cause of market worry are the European issues. The USD is benefitting from a Euro run into USD and US treasuries.

Below is the EUR/USD chart, but not showing the FX Intraday system.

The Sell Signal on the daily chart came after a uptrendline support break and followed by massive volatility. Notice from the 30min chart that the EUR/USD moved from 1.405 to 1.365 within 24 hours. This latest price action resumed a downtrend that started 2 weeks ago.
Today, in Asian trading hours, the EUR/USD made a significant gap down move. Seldom does FX have gaps, and one that is as large as this. Therefore, watching this gap fade or not is likely to indicate the movement of funds, which in turn the movement of risk money in the markets, and consequently the indexes.

Does not look too good to me for now.
Hang on!

The MadScientist
12 Sep 2011

Note: Any material posted here is of my sole opinion, and my opinion may differ or change. This is NOT a solicitation nor advice proceed with anything else as a consequence of reading these materials. The materials presented here are intended for educational purposes only.

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