2013-01-30

$ES_F : 1495-1505 : Expected Day Session Range for EMINI


FED DAY CHOPPY TRADING BEFORE FOMC

1520 still in sight but cautiously bearish for initial part of the day.


Market has been on a tear and made a new high at 1506 in overnight session. However the GDP numbers just came out and which were much lower then expected and these are likely to fuel a short set-up before FOMC announcement which is due at 14:15 ET. Any signal from FOMC on withdrawing liquidity will be bad news for this market on steroid but knowing Bernie it is very unlikely. Target area of 1520 is in sight now. There is no short set-up in play as we speak but if the GDP numbers weigh on the market we can have a minor short in play before FOMC.

Today I would expect 1503-05 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 now above 14 handle. This is a danger signal for bullish side.
  • There are signs of fatigue developing for the bulls.

My initial bet would be for finding resistance at 1503-05 to hold leading to a build up to 1494-96 and lower area. I would expect low of day in the region of 1495 area given 10-12 point expected range. Trading before FOMC would be choppy and after that volatile. I do not trade fed day very actively so chances are I would be done for the day and will be watching the market reaction to fed announcement while sipping tea.

Main support for longs is at 1491-94 area and any good buying there would imply bulls still in control. Sustained break below 1494 is warning sign for bulls.

If after breaching 1490, the market is unable to rise above 1499 I would need to reject the bullish case temporarily and expect further move down. Similarly the line in sand for shorts is 1507-09 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. Any profits on counter trend trades needs to be taken quickly before the trend change is confirmed.