Possible supply shock

Here is a 30 minute bar chart of day session e-mini trading. I think a supply shock occurred this morning after the consumer confidence numbers came out at 10am ET (red arrows). Normally this kind of action would imply a drop to 870 or so. However, I have decided to give my short term bullish view the benefit of the doubt. This doubt about a move to 870 would be removed by high volume selling below the midpoint of the rally from 884 - the 905 level (red dashed line). Unless and until such selling develops I will stick by my view that the drop from this morning's high is simply a normal reaction in an uptrend into the 965-80 zone.

Range estimate revision

Here is a 15 minute bar chart of e-mini day session trading. During the past 30 minutes the market has broken below the low of yesterday's intraday trading range (red rectangle). It did this on high volume relative to the past week's trading at the same time of day (red arrows and horizontal red line). This tells me that the 926.25 print was the high of today's range and that we will put in a bigger range than yesterday's. I am estimating a 20 point range for the day - 906-926 (blue rectangle).

Is the market headed back to 884 or lower?. I don't think so, but a drop below the 906 level on good volume would change my mind about this. In the meantime I will stick with my view that the market is on its way into the 965-80 range.

sold long at 920.75

Long one unit at 923.00

Guesstimate on June 30, 2009

September S&P E-mini Futures: Today I think we shall see a day session range of 915-930. The e-minis are on the way into the 965-80 zone.

QQQ: Support is at 35.00. The next upside target is 39.90.

TYX (thirty year bond yield): From its December ’08 low at 2.52% the yield on the long bond rallied to 4.83% on June 10. Support is at 4.20%, not far from yesterday's low at 4.27. The next big move will be a swing upward in yield to above the 5.00% level.

TNX (ten year note yield): From its December ’08 low at 2.04% the 10 year yield rallied to 4.01% on June 10 and since dropped to a low of 3.45% yesterday. Support is at 3.40 and the next swing should take the yield on the notes to 4.30%.

Euro-US Dollar: There is no sign of a top. Support is at 137.50 and I think the market will continue upward to 146.00.

Dollar-Yen: The yen will probably drop to 92.50 and then begin a move up to 105.00.

August Crude: Support is at 68.00. We think the market is forming a top in the 70-75 range and that the next substantial move will be downward.

GLD – August Gold: The market is headed for new highs near the 1050 level. Support is at 920.

SLV - July Silver: Silver is headed to 1700. Support is at 1385.

Google: Support is at 395. Next upside target is 500.

Tomorrow

Here is a 15 minute bar chart of e-mini day session trading. I think tomorrow's day session range will be about 12 points from 918 to 930 (blue rectangle). There is strong midpoint support near 913 and if the eminis are headed for 965-980 on this trip as I think they are this support should hold.

Sold long position at 922.25

long second unit at 920.75

Update

Here is a 15 minute bar chart of e-mini day session trading. My range estimate for today's day session is 912-930 (blue rectangle). Volume was not impressive on this morning's rally. This doesn't worry me yet because it is normal for volume to contract while the market is in a trading range. And I think the retrained volume of trading also reflects a general skepticism about the move up from 884.

Even so, I think midpoint support at 915 (purple dotted line) will hold and if it does I expect buyers to get more interested as the market rallies. In fact, if this market is really strong it will hold the highs of the trading range established late last week near 919 (dashed red line).

In any event I think the e-minis are on the way into the 965-80 range. And looking even further ahead I think that the rally which started from the March lows at 666 has a very good chance of continuing through September.

Long one unit at 913.75

Guesstimates on June 29, 2009

September S&P E-mini Futures: Today I think we shall see a day session range of 912-930. The e-minis are on the way into the 965-80 zone.

QQQ: Support is at 35.00. The next upside target is 39.90.

TYX (thirty year bond yield): From its December ’08 low at 2.52% the yield on the long bond rallied to 5.07% on June 10. At the moment it stands at 4.40% I think that a drop into the 4.10-4.20 zone is underway and from there the TYX will climb back above the 5.00% level.

TNX (ten year note yield): From its December ’08 low at 2.04% the 10 year yield rallied to 4.01% on June 10 and is currently at 3.66%. I think it will drop a bit further, to 3.40% or so before resuming its move to levels well above 4.00%.

Euro-US Dollar: There is no sign of a top. Support is at 137.50 and I think the market will continue upward to 146.00.

Dollar-Yen: The yen will probably drop to 92.50 and then begin a move up to 105.00.

August Crude: Support is at 68.00. We think the market is forming a top in the 70-75 range and that the next substantial move will be downward.

GLD – August Gold: The market is headed for new highs near the 1050 level. Support is at 920.

SLV - July Silver: Silver is headed to 1700. Support is at 1385.

Google: Support is at 395. Next upside target is 500.

Bulletin

Well, I am still living in computer hell, but there are now signs of hope.

I had, as a matter of habit, always backed up my data files. This morning I bought a new computer and had to shift from XP to Vista (yikes!!). My computer resources are now almost back to normal. But I still have no internet connection (I am writing this at an internet cafe), and won't have one until Friday afternoon (hoppefully).

So I expect to be operating normally by Monday morning.

I want to comment on the e-minis before I go.

I think today's rally was a decisive rejection of prices below the 900 level. It means that the e-minis have made their reaction low at 884 and are now headed up into the 965-980 range.

I also want to thank those of you who already have purchased my book. Sales are off to a good start, especially since the book has only been publicized on this blog. After you get your copy and read it, post a review on Amazon! And tell all of your friends about the book. Word of mouth is the best way of creating the buzz we need to move "The Art of Contrarian Trading" to the top of Amazon's best seller lists.

Guesstimates on June 25, 2009

Folks:

I had serious computer problems last night from which I am in the process of recovering. So today's guesstimate will only cover the e-minis:

I think today's day session range will be 880-895. I am still expecting a drop to 870 which should be followed by a rally into the 965-80 range.

An Emily Litella moment

Here is a 30 minute bar chart of recent e-mini day session trading. Contrary to my expectation this morning's fast up move out of yesterday's narrow range now looks like a fake out - an Emily Litella, "never mind" moment. The fact that the rally stalled at exactly the spot where it equaled the last rally on the way down was the first warning (purple dotted rectangles). After the Fed news volume expanded dramatically on the down side instead of contracting as it would during a reaction. This was the decisive consideration.

I know think that the reaction from last week's high at 953 is not over and that it will carry the market down to 870.

Headed down to 870

Sold long at 897.00

long one unit at 901.75

Take a look at this post

I just put a bond market post up on my new blog "The Art Of Contrarian Trading" - named of course after my book.

Bullish rejection, but no demand shock

Here is a 30 minute bar chart of day session e-mini trading. The market has moved well above the 900 high of my original range estimate. The advance from yesterday's close to the 905 high of a few minutes ago has been essentially uncorrected - a defining characteristic of a support rejection. The fact that this move comes out of yesterday's dull, narrow trading range increases my confidence that this indeed is a support rejection with bullish implications.

So I conclude that the drop from the 953 high was completed at yesterday's 884 low. There has been no demand shock yet - volume on this advance has been low to moderate compared to volume at the same time of day previously (green oval). But I do think we shall see a demand shock develop as the market moves higher.

In the meantime I think today's range will now be 896-916 (blue rectangle). The market has just rallied an amount equal to its last rally on the way down (purple dotted rectangles). So a reaction of 8-10 points would be normal. But I think 895 will hold if this is indeed a bullish situation.

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Guesstimates on June 24, 2009

September S&P E-mini Futures: I am again estimating a day session range for today of 880-900. The 904 level is strong resistance. If the e-minis show good upside volume above that level I shall conclude that the drop from the June high at 953 is over.

QQQ: Support is at 35.00. The next upside target is 39.90.

TYX (thirty year bond yield): From its December ’08 low at 2.52% the yield on the long bond rallied to 5.07% on June 10. At the moment it stands at 4.40% I think that a drop into the 4.10-4.20 zone is underway and from there the TYX will climb back above the 5.00% level.

TNX (ten year note yield): From its December ’08 low at 2.04% the 10 year yield rallied to 4.01% on June 10 and is currently at 3.66%. I think it will drop a bit further, to 3.40% or so before resuming its move to levels well above 4.00%.

Euro-US Dollar: There is no sign of a top. Support is at 137.50 and I think the market will continue upward to 146.00.

Dollar-Yen: The yen will probably drop to 91.50 and then begin a move up to 105.00.

August Crude: Support is at 68.00. We think the market is forming a top in the 70-75 range and that the next substantial move will be downward.

GLD – August Gold: The market is headed for new highs near the 1050 level. Support is at 920.

SLV - July Silver: Silver is headed to 1700. Support is at 1385.

Google: Support is at 395. Next upside target is 500.

Tomorrow

Here is a five minute bar chart of e-mini day session trading. The market has been quiet today, even after it broke below yesterday's low at 887.75. This is characteristic of corrective moves and tells me that the sellers are running out of ammunition.

I think tomorrow's range will be 875-895 (second blue rectangle). There is no sign of a bullish rejection of support so I still think the e-minis will drop to 870 or so before starting a big rally.

Up to #3,545 on Amazon

Book update - up to #5, 359 on Amazon!

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Revised range estimate

Here is a five minute bar chart of today's e-mini day session. The market has spent most of the session trading below its open (dashed red line). This makes it likely that we have seen the day's high. So my new range estimate is 880-895. Midpoint resistance stands at 891 or so (purple dotted line). I think any rally from current levels will stall there.

I still think the e-minis are headed down to 870 or so. But I also believe that from there a rally into the 965-80 range will begin.

First post on my new blog

I just put up my first post on my new blog The Art of Contrarian Trading.

Guesstimates on June 23, 2009

September S&P E-mini Futures: I estimate today’s day session range will be 880-900. The e-minis will probably continue down to 870 before a rally into the 965-980 zone starts.

QQQ: Support is at 35.00. The next upside target is 39.90.

TYX (thirty year bond yield): From its December ’08 low at 2.52% the yield on the long bond rallied to 5.07% on June 10. At the moment it stands at 4.46%. I think that a drop into the 4.10-4.20 zone is underway and from there the TYX will climb back above the 5.00% level.

TNX (ten year note yield): From its December ’08 low at 2.04% the 10 year yield rallied to 4.01% on June 10 and is currently at 3.72%. I think it will drop a bit further, to 3.40% or so before resuming its move to levels well above 4.00%.

Euro-US Dollar: There is no sign of a top. Support is at 137.50 and I think the market will continue upward to 146.00.

Dollar-Yen: The yen will probably drop to 91.50 and then begin a move up to 105.00.

August Crude: Support is at 68.00. We think the market is forming a top in the 70-75 range and that the next substantial move will be downward.

GLD – August Gold: The market is headed for new highs near the 1050 level. Support is at 920.

SLV - July Silver: Silver is headed to 1700. Support is at 1385.

Google: Support is at 395. Next upside target is 500.

Revised range estimate

Here is a five minute bar chart of today's e-mini day session. I am revising my range estimate to 885-907 (blue rectangle) from this morning's 892-907. My best guess is that the market will drop to the low of the estimate near 885 and then stage a 8-10 point rally. Such a rally would be as big as the last rally seen Friday afternoon (purple rectangle) and would carry the market up to the midpoint of today's day session (if we get as low as 885 first) (dashed red line).

I still think the market is headed for 870 before a big leg up starts.

Today's range

Here is a five minute bar chart of e-mini day session trading. This morning's range estimate is depicted by the blue rectangle (892-907). I am going to stick with this estimate for the time being, but this morning's rejection/supply shock makes it likely that today's range will turn out to be bigger than I thought it would.

In any case, I think the next rally should start from a level above 890 and carry the market up no more than 8-10 points. The last rally on the way down was 9 points (purple rectangles). The midpoint of the day session range thus far is 901-02 (red dashed line) and this would imply a rally from current levels of only 6-7 points. This is a better guess for the size of the next rally given that sellers are definitely in control of this market.

Supply shock ?

Here is an hourly chart of the September e-mini day sessions. We saw a marginal supply shock this morning - marginal because volume was relatively high but not "shockingly" high. In any case there is a clear rejection of prices above the 910 level visible on the chart.


The implication is that the market is headed down to its next support level which is at the level of the May reaction lows (red dashed line), roughly 870 (not 880 as I said in this morning's guesstimate). A drop from Friday's high which carries the e-minis down as much as did the first down leg would end just about at 870 (purple rectangles).

I think the 870 level is the drop-dead level for the upmove from the March lows. Weakness below 870 would mean that the market is probably headed down to 800 or so. However, I do not think a significant break below 870 is likely on this down move.

Guesstimates on June 22, 2009

September S&P E-mini Futures: I estimate today’s day session range will again be 892-907. I think the second down leg of the reaction started from Friday’s high at 923. The e-minis will probably continue down to 880 before a rally into the 965-980 zone starts.

QQQ: Support is at 35.00. The next upside target is 39.90.

September Bonds: The 113-00 target has been reached but there is now sign yet of a low. Resistance stands at 117-16. A bear market is underway in the bonds.

September 10 Year Notes: The downside target at 113-00 has been reached. There is no sign of a significant low. Resistance above the market stands at 117-00. I think a bear market in the notes is underway.

Euro-US Dollar: There is no sign of a top. Support is at 137.50 and I think the market will continue upward to 146.00.

Dollar-Yen: The yen will probably drop to 91.50 and then begin a move up to 105.00.

August Crude: Support is at 68.00. We think the market is forming a top in the 70-75 range and that the next substantial move will be downward.

GLD – August Gold: The market is headed for new highs near the 1050 level. Support is at 920.

SLV - July Silver: Silver is headed to 1700. Support is at 1385.

Google: Support is at 395. Next upside target is 500.

Problem resolved

The person who had set up the blog using a URL that was the same as the title of my new book has had second thoughts (thank you). He (or she) has given me access to that url and I have moved my contrarian trading blog to that address. Here it is - please bookmark it.

That is where I shall be blogging about contrarian trading.

Revised range estimate

Here is a five minute bar chart of day session e-mini trading. The market has spent most of the day trading below the open (dashed red line). This is bearish behavior and makes it likely the high of the day has been seen. Volume has been on the low side all day and the market had traded down to midpoint support (purple dotted line).

I think this support line will be broken later today and that the e-minis will trade down to 908 or so (blue rectangle) . If this happens I think the market will drop early next week into the 880-890 range before it can start a rally to 965-980.

Sold long position at 917.00

Sorry, this is a little late, but was reported on Tweeter (see right side of this blog) in a timely fashion. I have been distracted by a copyright thief and forgot to post this sale promptly.

Fraud alert - readers of my new blog

Folks:

When I set up my new blog, "The Art of Contrarian Trading", I carelessly misspelled the URL. As a result an alert fraudster setup another blog on blogspot with the title of my book spelled correctly. Consequently I have changed the URL for the genuine blog to www.realartofcontrariantrading.blogspot.com.

I am sure the fraudster has violated my copyright. He will suffer the consequences.

Update: The anonymous fraudster has deleted the offending blog from Blogspot.

Revised range estimate

Here is a five minute bar chart of e-mini day session trading. I think there is a good chance that we have seen the day's low. I am now estimating today's range as 918-932 (blue rectangle). The market so far has held support at yesterday's high (red dashed line). This is unusual behavior and is a sign of strength. Midpoint support is near 914 (purple dotted line). As long as this holds the trend which started from Wednesday's low at 899.50 is still upward.

Repurchased one unit at 920.00

Sold one unit at 919.00 will try again

Long one unit at 922.50

Guesstimates on June 19, 2009

September S&P E-mini Futures: I estimate today’s day session range will again be 912-930. Support at 900 has not yet been rejected but I expect this to happen soon. Once it does a move into the 960-985 zone will be underway.

QQQ: Support is at 35.50. The next upside target is 39.90.

September Bonds: The 113-00 target has been reached but there is now sign yet of a low. Resistance stands at 116-08. A bear market is underway in the bonds.

September 10 Year Notes: The downside target at 113-00 has been reached. There is no sign of a significant low. Resistance above the market stands at 115-16. I think a bear market in the notes is underway.

Euro-US Dollar: There is no sign of a top. Support is at 137.50 and I think the market will continue upward to 146.00.

Dollar-Yen: The yen will probably drop to 91.50 and then begin a move up to 105.00.

July Crude: Support is at 64.00 and continuation up to 75.00 is likely.

GLD – August Gold: The market is headed for new highs near the 1050 level. Support is at 920.

SLV - July Silver: Silver is headed to 1700. Support is at 1385.

Google: Support is at 395. Next upside target is 500.

What don't we see?

Here is a five minute bar chart of e-mini day session trading. What don't we see on this chart?

This morning started out well with good volume (not shown) to the upside accompanying some wide range up bars which carried the market above yesterday's high. But after this initial surge the market got very narrow - and as I write this has failed to show any follow through to the early buying.

This worries me, especially since this morning's early low was higher than yesterday's low. The buyers should have shown up by now and the market should be accelerating upward. Since this hasn't happened I am beginning to suspect that the market will have to take a peek below 900 before a move into the 965-980 range can start. Even so, I am bullishly biased I will still lean on support at 909 (dotted purple line) for another long position. Weakness below 909 will mean that a drop to 880-890 is underway.

Sold long position at 916.25

Range estimate

Here is a five minute bar chart of e-mini day session trading. My range estimate for today is 903-923 (blue rectangle). The move off of this morning's low showed good volume, but didn't have much follow through. As long as midpoint support near 909 (purple dotted line) holds I think this market will reach the top of my range estimate today and move even higher tomorrow.

So far I haven't seen either a demand shock hit the market or a decisive rejection of 900 support. I still think one or both of these phenomena will develop as the market moves higher. But, if not, I will have to start looking for a lower top and a second leg down for the drop from last week's high.

Long second unit at 912.50

Long one unit at 907.50

Guesstimates on June 18, 2009

September S&P E-mini Futures: I estimate today’s day session range will again be 900-920. Support at 900 has not yet been rejected but I expect this to happen soon. Once it does a move into the 960-985 zone will be underway.

QQQ: Support is at 35.50. The next upside target is 39.90.

September Bonds: The 113-00 target has been reached but there is now sign yet of a low. Resistance stands at 116-08. A bear market is underway in the bonds.

September 10 Year Notes: The downside target at 113-00 has been reached. There is no sign of a significant low. Resistance above the market stands at 115-16. I think a bear market in the notes is underway.

Euro-US Dollar: There is no sign of a top. Support is at 137.50 and I think the market will continue upward to 146.00.

Dollar-Yen: The yen will probably drop to 91.50 and then begin a move up to 105.00.

July Crude: Support is at 64.00 and continuation up to 75.00 is likely.

GLD – August Gold: The market is headed for new highs near the 1050 level. Support is at 920.

SLV - July Silver: Silver is headed to 1700. Support is at 1385.

Google: Support is at 395. Next upside target is 500.

Twitter

One of you suggested that I post my trades on Twitter AND on this blog. I am going to experiment with this idea to see what happens. Feedback and suggestions will be appreciated. You can find me on Twitter by clicking on the "FOLLOW ME ON TWITTER" line that appears on the right hand side of this blog right above the Blog Trading Record.

Advancing issues

I haven't commented on the advancing issues numbers in a while but I think they are sending an interesting message here. The charts you see above are constructed from the daily counts of the number of issues traded daily on the New York Stock Exchange that advance in price each day. The come courtesy of StockCharts.com. You can follow them in real time by clicking on the "My Chart List" link on the right hand side of this blog.

The black line is the daily count of advancing issues. You can see that for the past two days it has been rising even as the market averages have been falling. This is bullish behavior. This bullish action is much more significant when it occurs in the context of clear oversold conditions. The pink line is the 5 day moving average and the red line the 10 day moving average of the advancing issues numbers. Both have dropped to the solid green horizontal line which is the level from which good rallies in a bull market typically start.

These bullish indications from the advancing issues numbers have to be interpreted in a broader context. The market has dropped about 55 points from its top last week, thus matching the length of the biggest break on the way up from the March '09 low. It has dropped to strong midpoint support at 903. There has been so sign of a supply shock. For all these reasons I think the up trend from the March lows has further to go.

For these reasons I think that the e-minis are about to begin a stronger rally than we have seen in two months - a rally that will be at least 75 points in length and which may extend upward 10o points or more.

Update at 12:30 pm

Here is a 15 minute bar chart showing e-mini day session trading during the drop from last week's high. I got long early this morning at 904.50. I was expecting the market to dip quickly toward 900 and then stage a fast rally that would take it above the day session open at 906.75 (dotted red line).

In the event the market dropped a little below 900, but then took its time to rally. Even as I write this the e-minis have spent more time today below the open than above. I take this to be a minor bearish indication, one that suggests that today's range may turn out to be narrower than the 900-920 range I originally estimated this morning (blue rectangle). So when the market rallied as much as the biggest previous rally on the way down (purple rectangles) and into midpoint resistance (dotted purple line) I decided to accept my 6 point profit and look for another chance to get long, probably somewhere near my original 904.50 entry this morning.

I think we have seen the start of a base building phase which will be followed by a rally into the 965-980 zone.

Sold long unit at 910.75

Long one unit at 904.50

Guesstimates on June 17, 2009

September S&P E-mini Futures: I estimate today’s day session range will be 900-920. Strength above 916 will mean that a move into the 960-985 zone is underway.

QQQ: Support is at 34.50. The next upside target is 39.90.

September Bonds: The 113-00 target has been reached but there is now sign yet of a low. Resistance stands at 116-08. A bear market is underway in the bonds.

September 10 Year Notes: The downside target at 113-00 has been reached. There is no sign of a significant low. Resistance above the market stands at 115-16. I think a bear market in the notes is underway.

Euro-US Dollar: There is no sign of a top. Support is at 137.50 and I think the market will continue upward to 146.00.

Dollar-Yen: The yen will probably drop to 91.50 and then begin a move up to 105.00.

July Crude: Support is at 64.00 and continuation up to 75.00 is likely.

GLD – August Gold: The market is headed for new highs near the 1050 level. Support is at 920.

SLV - July Silver: Silver is headed to 1700. Support is at 1385.

Google: Support is at 395. Next upside target is 500.

Tomorrow

Here is a five minute bar chart of today's e-mini day session. I can't tell if the drop from last week's high is complete yet. I still lean towards continuation down to support at 903 or even a bit lower (red dashed line) - probably tomorrow. Should buying on good volume show up above today's midpoint (915.50 - purple dotted line) I shall look for a chance to get long. In either case I think tomorrow's day session range will again be about 20 points.

Range estimate revision

Here is a five minute bar chart of today's e-mini day session. My range estimate this morning was 910-925, but the market has been building volume as it has dropped (red slanted line). So I now think there is a good chance we shall see a print near the 900 level today (blue rectangle). Midpoint support near 903 (red dashed line ) is strong and I expect the drop from last week's high to end near there.

Guesstimates on June 16, 2009

September S&P E-mini Futures: Resistance stands at the midpoint of yesterday’s day session, roughly the924 level. Good volume buying above that level would mean that the reaction ended at yesterday’s 915 low. Meantime I’ll stick with my projection of a drop to 903 or so before the market moves into the 965-80 zone. At the moment I estimate that today’s day session range will be 910-925.

QQQ: Support is at 34.50. The next upside target is 39.90.

September Bonds: The 113-00 target has been reached but there is now sign yet of a low. Resistance stands at 116-08. A bear market is underway in the bonds.

September 10 Year Notes: The downside target at 113-00 has been reached. There is no sign of a significant low. Resistance above the market stands at 115-16. I think a bear market in the notes is underway.

Euro-US Dollar: There is no sign of a top. Support is at 137.50 and I think the market will continue upward to 146.00.

Dollar-Yen: The yen will probably drop to 91.50 and then begin a move up to 105.00.

July Crude: Support is at 64.00 and continuation up to 75.00 is likely.

GLD – August Gold: The market is headed for new highs near the 1050 level. Support is at 935.

SLV - July Silver: Silver is headed to 1700. Support is at 1450.

Google: Support is at 395. Next upside target is 500.

What's not happening ?

Here is a five minute chart of today's e-mini day session. The red dashed line represents the low of the recent trading range in the September contract. Here is my question. What don't we see in this chart?

Answer: increasing volume on aggressive selling activity after the break below the trading range low. I always say that what the market fails to do is often more important than what it does do. In this case, after the downside breakout volume remained low (green dashed line) and the market just drifted a little lower. This is not normal behavior after a downside breakout. One normally expects volume to build and prices to accelerate downward.

I think this means that we are seeing a reaction in an uptrend, not a reversal that could carry the market 150 points lower. I still think we shall see a 903 print later this week, but today's action means that I will follow any sign of a bullish rejection of 918 support.

A very good question

Here is a 30 minute bar chart of the e-mini day sessions for the last week. I just received a very good question from one of this blog's readers:

Karl,

as a trader how do you know not to get in like at 10:00am EST today ?
other times you would of jump right in with a buy, how do you know NOT to do it this time ?

thank you,
lilies

Why did the market look different to me at 10 am New York time today than it did at 10 am on Friday (horizontal blue arrows)? The answer is actually very simple - no black magic is involved.

First of all, as I have often said, I always try to trade in the direction of the last rejection of support or resistance. On Friday the most recent rejection was of prices above 950 (red down arrow). However, the previous two days had seen a rejection of support below 930 (green up arrow). Moreover, the initial wide range up bar of this support rejection had not been completely retraced as of 10 am Friday. So I was willing to give the market the benefit of the doubt if I had other reasons to think the buyers would soon be back in control.

Contrast that situation with 10am this morning (second blue arrow). The bullish rejection was now completely retraced, thus losing all of its bullish import, while a second bearish rejection had become visible. So on this score alone things looked much more bearish this morning than they did on Friday.

At 10 am Friday I could see that the market had not yet reacted as much as it did on its previous reaction (purple rectangles). This was a second bullish point that influenced me on Friday. On the other hand, by 10 am this morning the reaction had exceeded the size of the previous reaction, a bearish development.

Another thing that led me to a bullish position on Friday was the fact that the market was reacting from a new daytime high made the previous day. It is generally safe to buy the first reaction on the way down so long as it has not developed unusual volume and isn't bigger than the preceding reaction. But this morning anyone could see that Friday's rally had halted at a lower top. This was another bearish development that was not visible Friday morning.

Finally, the rally on Friday was a very low activity rally. The market struggled upward almost all day. Today, on the other hand, the sellers were out in force and the market fell easily, another bearish development.

I think this comparison of the market situation at 10am Friday with its situation at 10am today is instructive. And it shows that trading is a matter of making common sense comparisons of market situations using the ideas I have repeatedly offered on this blog and illustrated with my own trading decisions.

Today's range estimate

Here is a five minute bar chart of today's e-mini day session. I think today's range will extend from 910 to 930. At the moment midpoint resistance stands at 925 (purple dotted line).

Sellers in control

Here is a 60 minute bar chart of day session trading in the September e-minis over the past month. The market has dropped to the low of its June trading range at 918 (blue dotted line). I think this drop will continue down to support which stands at 903 (red dashed line) and 898 (purple dotted line). The 903 level is the midpoint between the 1067 October 2008 rally top and the November 2008 low. The 898 level is the midpoint of the May 2009 trading range. A drop as low as 903 would also equal the length of the biggest reaction of the past three months.

I think the drop from last week's highs will take several trading days to play itself out. Any break below the low of the May trading range (roughly 875) would mean that the market is probably headed down to 800 or so. At this juncture I do not think this is likely to happen.

Guesstimates on June 15, 2009

September S&P E-mini Futures: My comments early Friday are still my views this morning. As I write this the e-minis are trading below midpoint support at 936. If sellers take control while the market is below 930 I shall conclude that the e-minis are headed at least to 918 and probably to 903. For the moment I can’t estimate today’s day session range, but I do think it will turn out to be about 15 points wide.

QQQ: Support is at 34.50. The next upside target is 39.90.

September Bonds: The 113-00 target has been reached but there is now sign yet of a low. Resistance stands at 116-08. A bear market is underway in the bonds.

September 10 Year Notes: The downside target at 113-00 has been reached. There is no sign of a significant low. Resistance above the market stands at 115-16. I think a bear market in the notes is underway.

Euro-US Dollar: There is no sign of a top. Support is at 137.50 and I think the market will continue upward to 146.00.

Dollar-Yen: The yen will probably drop to 91.50 and then begin a move up to 105.00.

July Crude: Support is at 64.00 and continuation up to 75.00 is likely.

GLD – August Gold: The market is headed for new highs near the 1050 level. Support is at 935.

SLV - July Silver: Silver is headed to 1700. Support is at 1450.

Google: Support is at 395. Next upside target is 500.

Sold long position at 939.25

Trading around support

Here is a five minute bar chart of today's e-mini day session. I estimate midpoint support stands at 936 (red dashed line). The day session open was 935.25 (purple dashed line). The market has spent more than half the session today trading above the open, a modestly bullish development. The center of the day session range so far is just about at the opening price.

Overall I'd say the market is currently holding support and promises to move higher from here. I am now estimating today's day session range will be 931-945. If the market stays above 931 for the rest of the session I would take this as evidence that the sellers have run out of ammunition and that a move into the 965-980 range is imminent.

Long second unit at 936.50

Long one unit at 935.75

Guesstimates on June 12, 2009

September S&P E-mini Futures: As I write this the e-minis are trading below midpoint support at 936. If sellers take control while the market is below 936 I shall conclude that the e-minis are headed at least to 918 and probably to 903. For the moment I can’t estimate today’s day session range, but I do think it will turn out to be about 15 points wide.

QQQ: Support is at 34.50. The next upside target is 39.90.

September Bonds: The 113-00 target has been reached but there is now sign yet of a low. Resistance stands at 116-08. A bear market is underway in the bonds.

September 10 Year Notes: The downside target at 113-00 has been reached. There is no sign of a significant low. Resistance above the market stands at 115-16. I think a bear market in the notes is underway.

Euro-US Dollar: There is no sign of a top. Support is at 137.50 and I think the market will continue upward to 146.00.

Dollar-Yen: The yen will probably drop to 91.50 and then begin a move up to 105.00.

July Crude: Support is at 64.00 and continuation up to 75.00 is likely.

GLD – August Gold: The market is headed for new highs near the 1050 level. Support is at 935.

SLV - July Silver: Silver is headed to 1700. Support is at 1450.

Google: Support is at 395. Next upside target is 500.

Tomorrow

The market has dropped as low as 939 as I write this. Tomorrow I am going to lean on support near 936. If the market can hold there I think it will resume its move to 965-80. Significant volume below 936 will mean that a visit to 918 or 903 lies ahead.

Why I got out

Here is a five minute chart of today's e-mini day session. My range estimate is still 935-960. If so, why did I just sell my entire long position?

Well, the answer has to do with the risks involved with staying with the long position. After I wrote the last post I saw that I had miscalculated the location of the last two highs in the September contract. They actually stand at the levels of the red dashed line in this chart.

As the market reached these levels I was expecting it to break out above them on good volume. This still may happen later today. But in the event I saw two high volume bars right at the highs that made no net progress (red arrows). After the market showed a tendency to settle back I sold my longs. I didn't want to accept the risk that a good profit would disappear, especially after yesterday's hard knock to my PNL for the month. As a rule I have found it wise to accept a profit if there is reason to do so instead of hoping for an even bigger one.

Sold both units at 949.25

Revised range estimate

Here is a five minute bar chart of day session e-mini trading in the September contract.

I now think today's range will be about as big as yesterday's (blue rectangles), so 936-960 is my revised estimate for today. There were two electronic highs in the September contract at 959-961 so that area is likely to attract some selling. (added later - Not true. I screwed this up by calculating the Sept-June spread incorrectly. The highs I cited were at 951 and 953 - just about where the market is as I write this addendum.) But I do think this market is headed into the 965-980 range before a break as big as 20 points develops.

Support for the rest of the day is near 943, the midpoint of the day's early reaction (purple dotted line).

Note to Narayana:

My dear Narayana:

You seem to be playing a perpetual game of "gotcha" with me. Apparently you think that my interpretations of the market's activity are simply ex post facto rationalizations of my irrational (to you) bullish market view. Thus you delight in pointing out what you see as inconsistencies in my interpretations of volume, advancing issues numbers, etc.

But you don't seem to appreciate the fact that the significance of market action arises from the context within which it occurs. The same type of action can have a very different implication early in a trend from the one it has late in a trend.

In the present example the e-minis have been locked in a 25 point trading range for the past 9 trading sessions. During any sideways movement volume normally contracts. Indeed, after an extended advance such as the one we have seen from the March lows one should worry if volume does NOT contract within a trading range. High volume in a trading range after a long uptrend would be a significant sign of impending weakness. In any event, any extended trend generally ends in high volume that develops near its extreme, often during the first stages of the reversal move in the opposite direction.

So there is nothing inconsistent in my failure to mention the low volume on rallies within the trading range. It is high volume within a trading range that would concern me.

Long second unit at 942.25

Long one unit (September) at 939.00

Guesstimates on June 11, 2009

September S&P  E-mini Futures: Switching to the September contract today. Sept is trading about 4 points below June. I think yesterday’s afternoon rally represented a rejection of prices below the 930 level. If so the short term trend has turned up again. Today I shall lean on the 935 level (basis September contract) which is the midpoint of yesterday’s day session trading. As long as the market doesn’t spend much time below that level I will be thinking that it is now on its way into the 965-980 range. I estimate today’s day session range will extend from 935 to 950.

QQQ: Support is at 34.50. The next upside target is 39.90.   

September Bonds: The 113-00 target has been reached but there is now sign yet of a low. Resistance stands at 116-08. A bear market is underway in the bonds.

September 10 Year Notes: The downside target at 113-00 has been reached. There is no sign of a significant low. Resistance above the market stands at 115-16. I think a bear market in the notes is underway.

Euro-US Dollar: There is no sign of a top. Support is at 137.50 and I think the market will continue upward to 146.00.  

Dollar-Yen: The yen will probably drop to 91.50 and then begin a move up to 105.00.   

July Crude: Support is at 64.00 and continuation up to 75.00 is likely.   

GLD – August Gold: The market is headed for new highs near the 1050 level.

SLV - July Silver: Silver is headed to 1700.

Google: Support is at 395. Next upside target is 500. 

Late Update

Here is a five minute bar chart of today's e-mini day session. Midpoint resistance stands at 939. The market must stay below this level if my prognosis of a further drop to 918 or 903 is to materialize. A move above 939 on good volume would negate the significance of today's bearish rejection of prices above 950 by creating a bullish rejection of prices below 930.

Locating support

Here is a 60 minute bar chart of e-mini trading covering the past 6 weeks or so. I see two obvious support points for the reaction down from the electronic top at 957.50 last Friday.

The first one is 918 or so (red dashed line). This would be where I think the market would be supported if it were to develop a "false breakout" from the trading range which extends from 922 to 957.

The second level is stronger. It is midpoint support near 903 (purple dotted line). A drop to that level would also make the drop from 957 equal the size of the last reaction from 929 (purple rectangles).

Revised range estimate

Here is a 30 minute bar chart of e-mini day session trading for the past 10 days or so. I had to dump my long position when the market dropped below the 936 level on relatively high volume.

You can see that today's volume is not unusual compared with the other days' volume shown on this chart. This makes me think that the market is still going to be contained within the trading range outlined by the green dashed line. I now estimate that today's range will be 925-950 (blue rectangle).

The break below the 936 level coincided with the auction of the 10 year notes today. There will be a thirty year bond auction at the same time tomorrow. Evidently market players are using rising interest rates as an excuse to sell. As I explained in this post, I think this reasoning is faulty. Consequently I think the results of these auctions have bullish implications looking out more than a few days.

Sold long position at 935.00

Playing defense

Here is a five minute bar chart of e-mini day session trading. I thought today would be a bullish day with a day session range of 945-965. Instead sellers took control right from the opening. At the moment it looks like prices above the 950 level have been rejected and that the short term trend is downward. Even so, I don't see any unusual volume on this break so I think we have seen most of the day's range. I now estimate today's daytime range as 935-950.

Since I am long a full position in what appears to be a downtrend I want to sell out on a rally if I can. The most I can hope for today is the midpoint of today's range which at the moment stands at 944 (purple dotted line). I am leaning on midpoint support near 936 near which I expect the day's low to develop.

Long second unit at 941.00

Long one unit at 948.00

Guesstimates on June 10, 2009

June S&P  E-mini Futures: I estimate today’s day session range will extend from 945 to 965. The e-minis are on the way into the 965-80 range.

QQQ: Support is at 34.50. The next upside target is 39.90.   

September Bonds: The 113-00 target has been reached but there is now sign yet of a low. Resistance stands at 116-08. A bear market is underway in the bonds.

September 10 Year Notes: The downside target at 113 has been reached. There is no sign of a significant low. Resistance above the market stands at 115-16. I think a bear market in the notes is underway.

Euro-US Dollar: There is no sign of a top. Support is at 137.50 and I think the market will continue upward to 144.00.  

Dollar-Yen: The yen will probably drop to 91.50 and then begin a move up to 105.00.   

July Crude: Support is at 64.00 and continuation up to 75.00 is likely.   

GLD – August Gold: The market is headed for new highs near the 1050 level.

SLV - July Silver: Silver is headed to 1700.

Google: Support is at 395. Next upside target is 500. 

Tomorrow

I am going to stick with my bullish prognosis for a move up into the 965-80 range during the next few days. I am going to lean on the 936 midpoint which was also today's low. If it is broken on significant volume I will switch back to the short term bear camp. Meantime my expectation is for a range of 940-55 tomorrow.

Sold both units at 942.00

Near support

Here is a five minute bar chart of e-mini day session trading. As you know I think the market's rally yesterday represented a clear rejection of prices below the 930 level. I believe that it is important to trade only in the direction indicated by the last rejection the market makes of some support or resistance level. In this case the support level was the low of June 3 which was at 922.50.

If the market is indeed headed upward from here I think it will not trade below the midpoint of yesterday's day session at 936 (red dashed line). This is also the low of a trading range which has been established since yesterday's high (green rectangle). I am sticking with my range estimate for today of 935-950 (blue rectangle).