Tuesday, December 15, 2009

Hard to read

Here is an hourly bar chart of day session, e-mini trading in the March 2010 contract. As you can see the market has traded sideways for a month in a very narrow range with many gaps. The gaps show that most of the up and down movement within this range reflects trading in Europe and Asia while U.S. markets were closed. No one in the U.S. seems to see any need to adjust their portfolios, no doubt a reflection of the desire to lock in decent 2009 results after a horrible 2008.

The narrow range and low volume, dull activity makes this market hard to read. Even so, I have found that I rarely get repeated chances to sell near the high price of an important top. This makes me think that we are more likely to see a significant upside breakout from this range than a significant downside breakout. There is a small bit of evidence that the market wants to move higher during the next few days. On the chart you can see that yesterday's and today's day session activity has developed above the green dash line. When the market was above this line previously sellers took immediate advantage of the opportunity, but they haven't jumped the market this time, at least not yet.

I remain convinced that the e-minis will reach the 1140 level during the next few weeks.


P said...

Thanks for the update Carl. Yeah, this market is indeed getting boring, so to speak.

On a side note, I wonder if you ever followed AAPL, AMZN, given you followed GOOG and BIDU.

I've tried to either sell naked puts or write covered calls on my stock positions to earn some measly returns given the boring market action.

Kishore said...

Carl, it appears that the market will go lower first, for the next 3-4 days, before it goes higher.

For day traders at least, the market is heading down, with more to go.

PM said...

Hi Carl,

On 12/07/2009 03:29:00 PM I posted the following comment on your blog:

"On December 16th we must close above 1135.20 in order for this rally to continue, otherwise we'll see that long awaited correction."

That price and date refers to the December contract. For the March contract we're looking at 1129.70 on December 17th. Therefore, time is running out for this rally despite the bullish chart pattern. We must see March close above 1129.70 on Thursday or we're going to have that long awaited correction.

Of course, we could have a pull back on schedule and then see that rally resume, which is what I would expect.


Kindest regards,


extrader said...

I think what this market is telling me is that when it starts to make its move either UP or DOWN, it will be a much bigger move then the previous moves... All this consolidation means a very powerful move in either direction!

I am still sticking to 1085-1111 range, a break out of this range will be explosive!

jeff said...

Looking for us to fill the 1095 gap over the next couple days, followed by a final move higher. For now, I continue to watch this dull market from the sidelines while having some pretty good sleep while Europe/Asia take it up and down overnight.

Kishore said...

Carl, I doubt if the ES will go above 1110, in the near term.

In fact, the next visit of ES to 1110 will be a great shorting opportunity, just like 1119 was.

This time, if the bulls want to be really bullheaded about it, they may take ES to 1119 again and that will be an even a better shorting opportunity than 1110.

However, FOMC is the nastiest Bulltard of all. I would let them be out of the way by tomorrow afternoon before taking any new position.

Kishore said...

extrader, it is not consolidation. It is distribution, and that too, to a very few takers. These takers are probably just other HFT computers, who will promptly unload to the next bigger fool.

Yes, I too expect an explosive move, down!

In line with Obama's prediction of a double dip recession!

The banks are stealing from our deposits and the government is in collusion with them. If the government becomes so corrupt, the country is doomed, and so is the stock market!

jeff said...


I'm bias towards the short side, but you have a compelling argument to think we go up. First, the trend is up and second, we have seasonality.

What I do know is on the daily charts that the bollinger bands are getting tighter and tigher with each passing day. Whatever the direction, it's a safe bet that whatever the break-out/break-down will occur shortly and it be significant.

For now, I don't have any passion one way or the other. I think the best play this action is to continue to watch until the market shows its cards. Inevitably, it always does.