$ES_F : 1480 - 1490 : Expected day session range for EMINI

Long set-up still in play but nearing resistance and AAPL will weigh it down.

Bullish until trend change. 1500-1520 in sight.

US markets are maintaining their bullish position even though AAPL announced poor earnings and which is taking the stock down 10% in overnight session. Yesterday was again a low volume narrow range day and market did not manage to take out overnight highs which remain at 1491.50. The next target area of 1500-1520 is in sight now however the markets are looking overbought and ripe for a pull-back or correction. Still so far the short set-up is not in play and buying dip could still be in fashion.

Today I would expect 1481-79 as initial area of support. I will update the comments section as the day develops. Factors affecting the rally are:

  • Markets are now at multi year highs and many long set-up targets are met. Target for rally from May 2012 remains at 1520 and I would expect that to be met as well. For all its worth, we are in key resistance area and market can correct by 15-20 points without much notice.
  • VIX is at multi year low and making new lows and the term structure is steep (3m spread 3.05). Any pick up in VIX can halt this rally temporarily. 
  • Market is riding on earning optimism as well as forecast for future however on cyclical basis markets are nearing expensive area. 
All in all its a mixed picture and mixed day.  So far, trend is the friend of longs. No short set-ups have lasted more than a day and one needs to hold a short set-up and break prevailing long set-up before a sustained down move can begin.

My initial bet would be for finding minor support at 1479-81 to hold leading to a build up to 1490 and higher area. I would expect high of day in the region of 1489-1492 area given 8-10 point expected range. 1484-86 is also an area to watch for reaction.

Main support for longs is at 1479-81 area.

If after breaching 1478, the market is unable to rise above 1486 I would need to reject the bullish case temporarily and expect further move down.