This chart is very useful if you trade equity futures. It's the ES (SPX) continuous contract. You can use it for your regular ES trading, but it really comes in handy when we hit big moves and you need a longer term perspective. As you can see, the 200 ema (pink line) plays a critical role. Part of the panic in August was the failure of this level, as opposed to March, which was the precise low. More importantly, we have a convergence of the 20 dma (green line). The close was above both key averages and bulls managed to stay alive. Another important level is 1444 (discussed last month), 61.8% March/July. The real prize bulls need to recapture on a closing basis is 50% at 1467.50.
It still amazes me that we have not yet taken out March. I expect that event to occur next month, when disappointing earnings roll in. For now, this is still a pullback that is holding support, Since we have a Fed rate cut coming and an option expiration cycle loaded with bearish bets, my guess is bulls might have one more rally in the tank. But don't get carried away and start thinking we will have a repeat of the 2006 fall aberration. Quite the contrary. October should live up to its reputation as the "month of new lows".
Still, the big question for next week is: did we already get the sucker rally?
This entry was posted
on Friday, September 07, 2007 at 9/07/2007 09:25:00 PM.
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