2013-01-15

$ES_F : 1464-1452 expected day session range


Expected regular trading session range for e-mini S&P500 futures

Markets at Multi Year high can bring some pull-back. Cautiously bearish.


Markets have been in bullish stance since start of new year but lately they settled into very narrow conviction less range at resistance level. Last session was the first such session where an ongoing short set-up from 1466 was not broken and in the overnight session it met its target at 1457.75. This certainly does not mean start of a bear market BUT it certainly is a sign that a correction is due in next few trading sessions possibly a move 1446 (19th Dec top) or even 1436 area. If markets show sign of strength in support regions, the next move to 1500-1526 area can begin.

Today I would expect 1463-66 as area of resistance. Futures are pointing to a gap down so there is a good chance we might not even reach there. 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.
  • 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.
Since today is first day where shorts can show if they have strength to take the market lower and therefore the follow through would be of utmost importance for confirmation.

Today also my initial bet is to expect continuation of bearish development and possibly wider trading range. I would expect the high of the regular trading session in 1463-66 area which is last three sessions VWAP average and resistance for next  measured move short. Minor support is expected at 1456 area followed by main support for longs at 1454-1450 area. Expecting the usual 10-12 point day session range gives the downside target as 1456-50 area. There could be some stop driven move below 1450 area in case the bearish energy is high.

If after breaching 1466, the market is unable to fall below 1460 I would need to reject the bearish case temporarily and expect continuation of current rally.