2013-02-22

$ES_F : 1510-1490 : Expected Day Session Range for EMINI


Cautiously bearish. Two competing set-up in play. 1500 is key area. Bullish above, bearish below.

Today is day of struggle between new shorts v/s new longs


After 2 days of drops, markets are enjoying a rally in pre-market. However the current ongoing set-up is a short set-up. 1495-1490 were intermediate term support zone for longs. In that light, today is a difficult day to call, specially given it is last day of week and close below 1508.5 would turn the weekly trend down. At the same time close above 1517 will make it 8th consecutive green week. As can be imagined each side has something to offer in this struggle and can be cause of all the choppiness we might witness today. The last 2 days drop has done some shake up in recent bulls and possibly brought in some new bears. Now one side will have to prove they have muscle. All in all it is possibly a day of caution and mainly watching for set-up confirmation.

The reaction started from overbought territory which still remains the case. The fiscal cliff nonsense version II has started by various sides starting to make noises. Italy is going through election during weekend and that can bring some caution. I had been cautious on the highs, mainly trading on day trade basis only. I am also equally cautious here and not going short all the way in. Remember, so far only the long set-ups are broken. We need need a short set-up to hold. However tempting it looks, we need a confirmation for big short positions. So far I have two set-ups. 1500-1515 or 1510-1490. The key is to watch the reaction in 1500 area. At the same time 1518 remain key level for shorts. I will update the comments section as the day develops.
Since the running set-up is short, I am going with a cautious short bias. Today my initial bet would be to find resistance in 1509-1512 area leading to a move down to 1495-90 region. I would expect the low of the day in 1494-90 area expecting a 18-15 point range. Weakness can get the markets down below 1490 as well. Key support for longs is 1488-1470 area.

In my hypothetical stock portfolio I am now net short in the portfolio and looking to balance it at key SPY support levels.

If market starts breaching 1518 I would need to reject the bearish case and expect further move up to new highs.