Wednesday, October 26, 2011

Midweek midmarket rollover wrap - 26 October 2011

It is interesting how things happen...

I was out on a dinner appointment with my cousin who just flew in from Bali last night and since it was a preholiday evening, I decided to take it easier and leave the iPad alone. By the time the evening was done and charts were up, I was amazed. The equity markets (S&P500) had reacted rather strongly to news from Europe, which by the way, we all knew was a lot of hope.

Below is a quick look at the ES (S&P500) futures... (click on chart to enlarge)

The weekly chart looks bullish until this week. Closing at the current levels would mean a really ugly candlestick reversal pattern.

The daily chart on the other hand, had a sizeable rally, followed by a stall and then a rather expected breakout, which appears to be failing. Early this week, the ES was rejected at 1255 and yesterday closed with a bearish engulfing pattern. While the Buy signals are clearly seen, they were of lower probability (higher risk). The daily indicators also suggest a potential turning point with the Stochastics crossing over, and the RSI rejected at the bearish resistance. A strong downtrend would be in force if the RSI breaks below 50 in this instance.

The 30 mins chart offer an interesting perspective... having a bearish divergence on Price to Volume over the past 3-4 days since the breakout. This was one of the indications that the daily Buy signals were not low risk entries. Having failed at the neckline resistance, selling pressure came into play, and today at the market opening, a confirmation of the selling pressure was seen. Price action patterns show a break of the 1222 support at time of writing, and this is indicative of a trend change. From this point, I would be watching for a ice hole failure test of the ES 30 min 200 MA, aboout 1228.

So far, it looks like a potential roll over is happening and a down close today would result in the daily Three Outside Down candlestick pattern. Similarly, the weekly chart out start looking ugly as the week progresses.

Glancing at the /DX, it looks ready for the 30 minute chart bullish divergence to start equilibrating, and the daily/weekly charts show that support is tested.

/CL (Crude) which had been rather stubborn is now looking and confirming a change in trend too, after failing its daily 200MA.

Similarly, TLT and VXX charts are responding with a significant turning point after finding support at the daily FiboEMA yesterday.


The MadScientist

26 October 2011

Note: Any material posted here is of my personal opinion, and my opinion may differ or change without notice. These do NOT constitute a solicitation nor financial advice, and readers agree that these materials presented here are intended for educational purposes only. For any investment(s) and related decisions or actions pertaining to investments, always consult your own financial advisors, brokers, etc.

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