$ES_F : 1490-1504 : Expected day session range for EMINI

Long set-up still in play. 

Bullish until trend change. 1500-1520 in sight.

Markets seems to have digested AAPL disappointment really well and seems to be on steroids to make new highs. Last 5 sessions made a new high each session without breaching low of previous day significantly. This is overextending the rally a bit but what can one do. If this is what markets want, this is what they will get.  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 which is likely to end in 1480 area. The short set-up which was in play overnight has not worked

Today I would expect 1490-92 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.
  • Even though VIX ticked up yesterday it is still at multi year low and making new lows. The term structure has started flattening as well (3m spread 2.76). Any pick up in VIX can halt this rally temporarily however so far it seems market is oblivious of any danger.
  • Market is riding on earning optimism as well as forecast for future however on cyclical basis markets are nearing expensive area. 

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 1490-92 to hold leading to a build up to 1502-04 and higher area. I would expect high of day in the region of 1502-05 area given 10-12 point expected range. 1484-86 is also an area to watch for reaction.

Main support for longs is at 1484-80 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.