$ES_F : 1486-1496 : Expected Day Session Range for EMINI

Possible time for pause and cosolidation. Cautiously Bearish

1520 still in sight after consolidation.

After 8 consecutive green days, SPX finally had a pause and  it would appear a short set-up is play. The rally has been over-extending so there is a good chance that this short set-up will play for 15-20 points drop from the high which brings 1485-80 area which also happen to coincide with key support. Target area of 1520 is in sight now. For trend to change we need to have one established short set-up to run for at least a day and then produce a follow through.

Today I would expect 1495-97 as initial area of resistance. I will update the comments section as the day develops. Factors affecting the rally are:

  • Markets reached multi year high on extending rally and reached key targets for many long set-ups with reducing volume. Target for rally from May 2012 remains at 1520 and I would expect that to be met as well. But for all it is worth, a consolidation in 15-20 point range is on card soon.
  • VIX has started ticking up and knocking back at 14 handle. The term structure has started flattening (3m spread 2.35) indicating short term volatility increase at the cost of longer term vol. Any pick up in VIX can halt this rally temporarily however so far it seems market is oblivious of any danger.
  • There are signs of fatigue developing for the bulls. 

My initial bet would be for finding resistance at 1495-96 to hold leading to a build up to 1487-85 and lower area. I would expect low of day in the region of 1486-83 area given 10-12 point expected range.

Main support for longs is at 1480-84 area and any good buying there would imply bulls still in control.

If after breaching 1480, the market is unable to rise above 1492 I would need to reject the bullish case temporarily and expect further move down. Similarly the line in sand for shorts is 1501-03 area. Remember we are still in major long set-up and therefore bearish trades, in the initial phase require caution and confirmation from intra-day set-ups.