General Musings : Markets Review of key levels for position trades

Various Markets - General Review

Markets trend - chop and trend again. It seems after the mauling in late 2007 - 08, and then chopping around for a while, many markets have shown some reversal of trends. This can be a goldmine opportunity to be able to catch a new trend in beginning or it can be part of a wider "chop" and reversal to predominent trend of 2007-08 (or more chop in the same trading range). Those who subscribe (or merely use) Elliot Wave theory might recall that bulk of the money is to be made in wave 3 (middle of trend). At the start and end of the trend, the markets are choppy and traders, especially those with lack of discipline tend to get chopped out. Especially for a longer term trading perspective, trying to catch the middle of the trend with trailing stop losses and use coverred options sell/target exit levels can be the key.

Since March 2009, many markets are showing some life and here is my review of key markets, my perceived general trend, and key levels to watch. Something to pass time on a long bank holiday weekend.

INDICES:

The rally from March 09 lows has been impressive. However this rally has been without a good pullback, i.e. retracing 50% or more but still avoiding taking out the lows. So a pullback may be on cards as soon as bulls run out of steam. The question is WHEN?

For now I still see bulls in the market however I have taken 50% off on most positions and trailing stop below nearest support below 61.8% retracement. 200 EMA is still a magnet.

NQ:

Current position - Long

Watch for breakdown below 1322/1300 to signal start of retracement/pullback. NQ has been leader lately on this rally so a breakdown should pull other indices as well. 1240-1190 would be my testing zone and if they hold, could be worth going long again looking for 1680-1760 area as swing trade with stop at March low. The level to be refined nearer to the time.

ES:

Current Position - Flat

For short term, 882 - 875 is key level. If we start breaking from here, need to take some profit and watch for bounce from 799-768 level or infact consider some short position. The key is to hold March Lows to make highs at 1066 level.

ZB:

Current Position - Short

US long dated bonds have broken below key 120 level and are below 200 EMA. The trend is increasingly looking negative. Adding to existing short positions with stops above 123'16 could be a good trade. Target of 116 -113 does not look that far fetched however such weakness in bonds can pull the stock market down as well. Since this apepars to be last wave of downtrend, trailing stop losses would be key. Modified 2 bar high stop can be used to exit out. UBS says that only 18 times in last 20 years Bonds Stocks and USD has gone down together. Is it time for more such occurances. 

GC:

Current position - Long

In times of uncertaininty, having a long position in GC is always useful. Gold has bounced well from the lows and seems to be heading for tripped top, which if taken, can make for a killer move. So buying dips to 950-940 until USD returns to sensible level is the trade with stop below 920. With current level, ES/GC ratio has gone back below 1 but in current market Long GC long ES trade is better way to play for some time. I still count 869 as key low and support.

CL:

Current position - Long

Crude oil seems to be making new high and appears bullish with targets 68/72/80/91 in sight. Buying dips with 55 as stop level for medium term trades adding to existing long positions.

ZC:

Current Position - Long

ZC still appears to be in bullish mode though much of the moves have been in ZW and ZS. However if the grain trend continues, ZC has upside potential until 486 or even 608. Stop as of now around 400 level.

DX:

Current Position - Short

Trend is still down. Could add short at 82 82.5 level with stop above 84 and trailing. It looks to be a long way down so worth holding runner until a clear change in trend.