2013-01-16

$ES_F : 1458-1470 expected day session range for emini.


Still a tug of war between long and short. Flip Flop days!

Potential attempt at highs. Cautiously Bullish.


Markets are still settled in the narrow range but keeping that bullish posture on daily time frame. Current markets are difficult to trade and best watched for developing set up and catching up with reading or facebook. So far the short set-ups which had emerged have been broken so a new one need to emerge and hold before a sustained trend change can be called. The trading is bit conviction less choppy and lacking energy for sometime. Having held its ground, I expect the next move could be to make next attempt at multi year highs at 1479-77 area as first target. Down side possibility of a move to 1446 (19th Dec top) or even 1436 area remains on card if support breaks. If markets show sign of strength in support regions, the next move to 1500-1526 area can begin.

Today I would expect 1458-59 as area of support. I will update the comments section as the day develops. The concern for rally remain the same:

  • Markets have now touched multi year high level which were last seen in Jan 2007 and its setting up a double top, which can bring a temporary pull-back. I would expect some selling in that area, especially in the early part of the session. For bullish case to remain, the area needs to be breached convincingly.
  • VIX is at multi year low and the term structure is steepening (predictably in anticipation of another drama related to Debt Ceiling in coming months). Any pick up in VIX can halt this rally temporarily. Today VIX futures move to Feb hence some rolled over action can pump VIX higher.
  • The rally which started from 31st Dec 2012 has met its initial target at 1468. If this rally is not extending, we are due for a pull back. So far 1468 area has proved resistance and futures have not managed to close above it even after 3 attempts.
So far shorts have not managed to show a follow through and therefore the balance remains on bullish side.

My initial bet would be for finding support at 1458-60 to hold leading to a build up to 1468 area. If that is visited early on in the day, I would expect it to breach. I would expect high of day in the region of 1468-1472 area given 10-12 point expected range.

Minor support is expected at 1460 area followed by main support for longs at 1456-54 area. Stop driven activity can move market above 1470 if 1468 is reached early on in session.

If after breaching 1456, the market is unable to rise above 1464 I would need to reject the bullish case temporarily and expect further move down.