The Emini closed down 56.75 points at 1,396.00 on Tuesday. What a day and I hope everyone who follows this blog was short. Like Elliott Gould (Reuben Tishkoff) in Ocean’s Twelve says:
"What, you think the stock market is some great mystery beyond the realm of human understanding? Didn’t you see the signs? I saw the signs."
Well enough of that. Let’s concentrate on what is going to happen NEXT. Remember, the focus of Emini-Watch.com is swing trading and holding positions for about 5 days on average before reversing. We made good money on the last leg down – is there more downside to come or should we be looking to go long for the next upswing?
The first chart (above) shows the huge Emini volume today – 3.2 million contracts traded, a record. I’ve also superimposed a Fibonacci retracement tool, starting at the low last July and ending last week. It shows we’re close to the 61.8% retracement level of 1,384 – where we would typically see some resistance.
The second chart (above) is one I’ve never published before. As you may know I use 4 non-correlated, leading oscillators to measure trend. This indicator, labeled Trend Signals, is the combination of all 4 trend measures. It catches peaks and troughs quite nicely and signaled the down trend last week. It now shows we’re heavily oversold and currently reads -213, on a scale that typically goes from +150 to -150.
The third chart (above) shows John Ehler’s Hilbert Sine Wave on Emini daily bars. I’ve extended the time frame on this chart so you can see when the Sine Wave indicator declared this market in an uptrend – September 2006 (red colored Emini daily bars and above the breakout white dotted line).
In January the trend was broken and we went into a cyclical topping pattern, shown by the Sine Wave and alternating red and white dotted lines superimposed on price. The trend turned down 2 days ago, shown by green colored Emini daily bars. What is important is that the Sine Wave is about to cross and signal a cyclical bottom – most likely tomorrow or Thursday.
The last chart (above) shows the Bond market and two indicators. The first one, labeled Spread Oscillator, measures the valuation of the Emini versus Bonds. In short, we’re now massively oversold. Today cash flooded into the Bond market as a safe haven and pushed Bond prices way up – and this is on top of an uptrend started at the end of January. The second indicator is the blue line superimposed on Bond prices. I have found in my analysis that equity prices tend to lag the Bond market by 20 days – and 20 days ago the Bond market bottomed and started it’s current up trend.
- Climactic selling volume today
- Emini close to 61.8% Fibonacci retracement level
- Trend indicators have bottomed but not ticked up yet
- Cyclical low either tomorrow or Thursday
- Emini valuation versus Bonds now very attractive
- Bond market in up trend and turned 20 days ago
A long post today, I know. I hope you find it useful. Good luck Emini trading tomorrow.