Mar 022011

As I wrote yesterday, I’m watching both Bund, Stoxx & ES.  I’m short the stoxx with a partial position left.

The bund had two negative days but still manages to stay inside it’s balance area.  It’s now testing this in after-hours trading (currently at 123.75).

First, this makes a great long setup so I’ll be looking for a long tomorrow, with 124.10 & 124.60 as targets.

Second, if the bund gets accepted in the previous balance area, then I’ll look for a short with a target of 123.70 and then 123.51.  And that will also be a warning that ES could bounce up.  I still think ES will test the gap I mentioned but lately I’m forcing myself to consider all alternatives.  Can’t be too prepared.

Today’s action in ES was balanced and that’s to be expected after a monster move down.  The move outside this balance will be key.  And we can balance some more too.

Mar 012011

Lately I’ve been writing about a potential market turn in ES & Stoxx and the corresponding turn in the Euro Bund.

ES got off to a good start but then it bounced back up.  When the retracement went above 68% I thought we’d retest the highs again but today is a major down day and it shows me that professionals are not finished selling and they were just waiting to sell the bounce.  If you look at the ES volume (not shown) you can see it was much lower for the two up days.

I was surprised that ES stopped short of the gap area on the way down, I expected at least a test of this gap.  It looks like ES is headed back down and this time I think the gap will be tested.  The result of the test will be very important.  The two possibilities are ES goes back up to retest the highs or ES continues down into a major correction.

The bund has been very telling, not only did it break out before the drop in equities, it is holding its gains and staying in its balance area.  As long as it keeps going up then I expect the equities to continue down.

I hope your trading is going well.