Tuesday, November 1, 2011

The morning after Halloween - 1 November 2011

As if the Trick or Treating didn't end well, the morning after Halloween looks set to have the markets follow through a deep retracement.

The week just started and if it ends at the current level or lower, the weekly ES chart would be posting a very bearish candlestick pattern. As of yesteray's close, the trend is still up and the retracement looks to be deep. The daily ES chart has a clear failure to breakout and stay above the 200MA, and it looks set to follow through with more downside for today, particularly with an early but strong Sell signal today. There is support at 1228, and at time of writing, the ES was already trading at 1228. The 30 mins chart is showing that the support should hold, failing which a lot more downside would follow through later in the week.

Looking at the TTR model, it appears as this downside risk is likely to continue...

As mentioned yesterday, watching the USD (and also the TLT on an intraday basis) helps in telling where the money is moving.

The weekly DX (USD futures) chart has a bullish crossover and this indicates a higher USD in weeks to come. The daily chart shows a strong support enabling the USD to bounce at 75, by and large due to the timely intervention of the Yen by BOJ, as well as the re-emergence of the Euro worries. The Euro worries were underpinned by the increasing yield demands of the Italian bonds, despite the equity market rally of last week. So, keeping an eye on bonds is telling of the underlying story.

Looks like we are in for another down day, although I would not be surprised if there were to be an intraday retracement rally in the morning session.

The MadScientist
1 November 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 herePublish Post 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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