The ES Forecast (by Springheel Jack)

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I've been on a roll recently. I forecast the low near 1000 &
predicted a likely rally to the 1070 – 1090 ES area. Once there I called
1099 as the likely rally top and this week I predicted on Monday
morning that we'd most likely start the week with two days of rally with
a likely target at 1084.5. Not bad going, though I'm not expecting to
match that performance all the time of course.

For the low target I was using a rough declining channel on SPX, for
last week's high a rising channel from that low, and yesterday's high
has been a key support / resistance level on SPX for quite a while now.

My main tool for assessing likely immediate market direction was Alex
Grant's excellent ES
forecast
, which he sends to his subscribers by email for a very
reasonable $30 per month. I've been checking it regularly since he
warned his bearish blogger friends last year that the ES forecast was
predicting a sharp rise off last July's low lasting for several months.
Alex has given me permission to publish his current daily forecast here
and so here it is:

100721 ES Forecast

The forecast is a mechanical forecast using Alex's proprietary
indicators, and reverses sometimes, so that it then does the opposite of
what the forecast predicts, but as a tool for assessing likely market
direction I rank it very highly, as I know that there is no such thing
as an infallible crystal ball for market trading, and if there was, I
wouldn't be expecting to get access for $30 per month. The targets given
on the forecast are also very rough, so I tend to use my own channels,
patterns and support / resistance levels to call these.

If you're interested in subscribing yourself the link is here.

As you can see the ES forecast is now forecasting a strong bearish tilt
for the next few weeks taking us into the 900s, which as long as it
doesn't reverse direction of course, gives us the likely timeframe to
play out the bear scenario if it is going to play out.

That fits my overall bear scenario on the SPX daily in which we are back
at the top of the main SPX declining channel:

100721 SPX Daily Bear Scenario

This gives a model short entry here in my view, with potential
downside here of 220 ES/SPX, and a stop at 1101 ES as that would be a
break above my SPX declining channel, and would also deliver the bulls
their higher high to go with their higher low, though only a break of
the June high would finish off the summer bear case altogether in my
view.

As for today you can see that the ES forecast is projecting sideways to
down over the next few days, and we may fill intraday the open gap at
1093 ES. I had a broadening bottom on ES yesterday that broke up with a
target of 1103 ES, but only 59% of these make target, and I'm not
expecting to see last week's high broken:

100721_ES_60min_Broadening_Bottom

That isn't to say that it won't be broken of course, the risk/reward is
very good for a short entry here with ES at 1087 at the time of writing,
but the bulls are still in with a good chance and the indicators I
watch are very mixed on market direction at best.

'Dr Copper' has a scarily bullish chart, and I was disturbed to see that
break up through resistance this morning. Here's my take on that:

100721_Copper_Daily_Channel_and_Patterns

Recent action in long term bonds is solidly (equity) bearish of course,
but EURUSD up from my broadening descending wedge last week and has't
reached my obvious next target near 1.32. It is retracing at the moment,
but that may just be a retest of the broken wedge upper trendline near
1.27:

100721_EURUSD_Daily_BD_Wedge_Broken

Oil and CADUSD have also had bullish breaks up this morning and AUDUSD
is testing a key resistance level. The bulls are still in with a very
real chance here, but I'm not expecting last week's high at 1099 ES to
be broken, and until it is, I'm expecting us to fall hard from here over
the next few weeks.

If not, we should know very soon and I'd be out or considering exit
strategies on all shorts at 1101 ES.

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