E-Mini S&P 500 Future (ES) Is Trading At Important Levels (Technical Update, July 29, 2011)

This is a technical update on the E-Mini S&P September 2011 Future (ES), which trades overnight. When Republican Leaders cancelled the debt limit vote last night, both the S&P future and U.S. Dollar (in Euros) initially sold off. ES traded all the way down to its 200 day moving average (red line) and uptrend line from June 2010, where it bounced. ES is still trading under its 50 day moving average (blue line), so I'm thinking the debt limit vote will either be the catalyst for the next "risk rally" (watch QQQor technical breakdown, which would confirm a new bear market. I'm trying to figure out if that is a head and shoulders formation at the top (bearish), or an ascending triangle (bullish). The second chart shows that ES already broke through the bull market trend line from March 2009. If ES breaks through the 200DMA and trend line from June 2010, it looks like 1,200-1,215 is the next area of support (pre-flash crash high). See charts after the jump.


E-mini S&P 500 September 2011 Future (ES) - 2-Years
Courtesy of OptionsXpress

E-mini S&P 500 September Future - 3 Years
Courtesy of OptionsXpress

Comments

  1. Sorry, it's neither a triangle or an H&S formation. It's simply put a reversal diamond formation. Real H&S needs the right shoulder to be equal or lower than the right shoulder and it needs to have  neckline as well.The right shoulder in ES is higher than the left shoulder.

    The sequence of move of your chart makes no sense as to call it a triangle as well. The sequence of moves defeat the triangle idea.

    On the other hand, one can clearly draw a broadening triangle and a triangle which composes a diamond top. just watch the sequence of moves and connect the monthly highs and lows accordingly and you will get the idea. 

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  2. You're right, it doesn't look exactly like a H&S formation. I don't think you should look at technical analysis that deeply. I mean, high frequency robots using algorithms are painting the tape. Clearly there was risk to the downside when it was testing that trend line and 200DMA. The lower high on the "deformed right shoulder" was worrisome as well. The lower high you are talking about for the head and shoulders pattern didn't even work in 2010, so I think you have to take other factors into consideration. Was that also a diamond top in mid 2010?  Regarding the ascending triangle, I thought if a strong green candle busted through 50DMA resistance (for whatever reason, Fed buys a trillion of bonds, Carlos Slim buys the Eurozone), that would have been bullish for ES, testing the 2 previous highs (or actually 3). You can also say ES was was in a symmetrical triangle inflection point which I forgot to do. In my opinion, formations change with the market and it's all about timing chart sentiment (risk/reward). I was not going to call a top in this post; I simply thought there was downside risk from what I saw.

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  3. You're right, it doesn't look exactly like a H&S formation. I don't think you should look at technical analysis that deeply. I mean, high frequency robots using algorithms are painting the tape. Clearly there was risk to the downside when it was testing that trend line and 200DMA. The lower high on the "deformed right shoulder" was worrisome as well. The lower high you are talking about for the head and shoulders pattern didn't even work in 2010, so I think you have to take other factors into consideration. Was that also a diamond top in mid 2010?  Regarding the ascending triangle, I thought if a strong green candle busted through 50DMA resistance (for whatever reason, Fed buys a trillion of bonds, Carlos Slim buys the Eurozone), that would have been bullish for ES, testing the 2 previous highs (or actually 3). You can also say ES was was in a symmetrical triangle inflection point which I forgot to do. In my opinion, formations change with the market and it's all about timing chart sentiment (risk/reward). I was not going to call a top in this post; I simply thought there was downside risk from what I saw.

    ReplyDelete
  4. You're right, it doesn't look exactly like a H&S formation. I don't think you should look at technical analysis that deeply. I mean, high frequency robots using algorithms are painting the tape. Clearly there was risk to the downside when it was testing that trend line and 200DMA. The lower high on the "deformed right shoulder" was worrisome as well. The lower high you are talking about for the head and shoulders pattern didn't even work in 2010, so I think you have to take other factors into consideration. Was that also a diamond top in mid 2010?  Regarding the ascending triangle, I thought if a strong green candle busted through 50DMA resistance (for whatever reason, Fed buys a trillion of bonds, Carlos Slim buys the Eurozone), that would have been bullish for ES, testing the 2 previous highs (or actually 3). You can also say ES was was in a symmetrical triangle inflection point which I forgot to do. In my opinion, formations change with the market and it's all about timing chart sentiment (risk/reward). I was not going to call a top in this post; I simply thought there was downside risk from what I saw.

    ReplyDelete
  5.  I beg to differ once again. Looking at the technical picture is all there is and it is pretty clear at the present moment.

    And once again I see no triangle or flag in that post of yours. There is simply no sequence of moves in it. ;-)

    The low of the year was taken out this week. Therefore, the main move of the year has changed to down, so further expansion south should be expected and some. Measure the main diagonal of this diamond and you will get the minimum objective target. 
    The monthly chart demonstrates a huge broadening triangle in place that also might turn into a diamond in the future. Right now we possibly have initiated the right side of it (upper right trend line of a triangle). I would expect this to head to around 8500-9000 points in the upcoming years before it retakes the bullish side again. 

    I read an analysis by a fellow analyst from UBS stating that he sees a top at 1450. Anything is possible, However, I really much doubt it with the current technical picture.

    Regards.

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  6. Sorry, I posted 8500-9000... That is for the DOW... ;-)
    The ES has a very similar technical picture to the EDOW.

    Therefore, I expect it to be much lower in the upcoming years.

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  7. Hey can you insert a chart of where you see a diamond? Are you just connecting resistance from the previous uptrend to resistance on the recent downtrend? Yeah, Peter Lee of UBS was just on Breakout (Yahoo Finance) saying that http://www.distressedvolatility.com/2011/08/ubss-peter-lee-s-below-1250-triggers.html.

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  8. Yeah I'm with you http://www.distressedvolatility.com/2011/08/s-2007-bull-market-top-wedge-breakdown.html

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