$ES_F : 1484-1494 : Expected day session range for EMINI

Long set-up still in play but nearing resistance.

Bullish until trend change. 1500-1520 in sight.

Broader US markets are basking in their new found glory. Russell-2000 is at all time high, that is higher than dot com, higher than 2007 peak, higher than anything it has been in its history. DowJones and SPX are not far behind. The earning season has started on positive note with GOOG and IBM reporting good results and all eyes are on AAPL tonight after close. It seems investors are more optimistic than economists this time and the trend firmly remains on long side. 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 there is no point in fighting the tape and until a short set-up holds for more than one day, it pays to buy the dips with caution.

Today I would expect 1484-82 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 the term structure is steep (3m spread 3.08). 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. 

But 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 1484-82 to hold leading to a build up to 1494 and higher area. I would expect high of day in the region of 1492-1496 area given 10-12 point expected range.

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.