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TheNegotiator

Time for a Top in ES?

By TheNegotiator, in E-mini Futures

Has the ES topped out for now?  

8 members have voted

  1. 1. Has the ES topped out for now?

    • Yes definitely, it's going to take a nosedive now!
      1
    • Yes, I think it needs to trade sideways for a while.
      3
    • No, it may dip a little but it's going to the moon!
      2
    • I'm really not sure.
      0
    • Actually, I don't care :)
      2

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TheNegotiator    13

TheNegotiator
Posted

Over the past few days, the ES has been moving back down from the current highs made at 1377.25 on 2/29/12. The current tight uptrend has been in place since a pullback of around 60+ points in Dec last year.

 

Now many people have been calling for a market top recently and so I thought it'd be useful to discuss the chances of this. Whilst this is a discussion about the ES, of course the same logic can be applied to anything else.

 

Right now, I am seeing some signs of a possible pullback. Note that I said pullback not top. I think the distinction is important as I personally feel that the stock markets could be ultimately set to go much higher given the support that is so freely offered to them.

 

I have done a couple of charts to help illustrate a key point. The first shows how until yesterday, the last 3 consecutive RTH sessions in ES to show lower highs were actually before the 60+ point pullback. Admittedly the ranges were much bigger at that time, but nonetheless, since then has been pretty much one-way traffic.

 

attachment.php?attachmentid=27763&stc=1&d=1331036993

 

attachment.php?attachmentid=27764&stc=1&d=1331036993

 

The other point is that value or most traded volume in the same last 3 rth sessions, has been lower each day. Now this is not to say we are going into a retracement necessarily either. It's more than possible that we do move lower to establish a short term bracket low and move sideways for a time before moving one way or the other. Auctions basically tend to go:-

 

Imbalance-Balance-Test-Imbalance

 

The current move up from Dec '11 is imbalance.

 

Anyway, balance can be short or not so short. The next chart shows possible areas of importance where the market may no longer be imbalanced to the upside and possibly when it may become imbalanced to the downside.(1350 odd and 1330 odd).

 

attachment.php?attachmentid=27762&stc=1&d=1331036993

 

The question is, what do you guys think of the odds of a short term retracement here?

2012-03-06.thumb.jpg.21716778f6116984d82ad80fca48fe64.jpg

2012-03-06_2.thumb.jpg.5ba53438d23c28e4494a0ef167210575.jpg

2012-03-06_3.thumb.jpg.efc6d32f1bd2ae02df3c0a8775e5124a.jpg

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TheNegotiator    13

TheNegotiator
Posted

I should note that in the 1st chart, the actual last 3 consecutive rth sessions with lower highs were just after the left red box. The box shows the first 3 in the start of that whole move down with lower highs each day.

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david_uk    10

david_uk
Posted

I am writing as we approach the close of rth trading on Thursday 8 March. The ESH2 contract is currently trading at 1366.50

 

So far today we managed to get up to 1368.50 but since then we have backed downwards again.

 

I think the chances of a fall from around current levels are greater than a rise. If that were to happen then we would be well on the way for a potential '1-2-3 top reversal' pattern.

 

If we break 1330 then I think the the way forward is 'clearly' to the downside. If however we get to 1380 say, then this bearish idea of mine is most probably wrong.

 

In terms of how far could we drop, I think we could well drop a long way ... say some 100 / 150 ES points (ofcourse on the shoulders of the June contract as the March contract is close to expiring).

 

David

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TheNegotiator    13

TheNegotiator
Posted

David, I think we can see that there was plenty of willingness from the market to explore downwards. The Greek debt swap deal completing has us higher again today. It doesn't mean that the top is out of the question either though. A failure to follow through higher could be seen as week if that scenario plays out. I would think that any bulls though would want a break higher in the next few days and also have the gap from wednesday to thursday act as support.

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