E-mini S&P500 Market Analysis

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Chart Analysis

The market yesterday closed down again and reached a (more serious) intraday low of 2085.25. Is the correction over? Maybe. It has for sure entered the ~2097-2040 DAILY range that we originally indicated as “buyable” for short-term swing traders. If you are a long-term holder and you did not buy some weeks ago in the ~1970 area, this is an area where you may have started to consider buying again, it’s better than buying at the previous peak at ~2110, although of course is not such a great buy as it was a few weeks ago, but these WEEKLY+MONTHLY LONG setups don’t come up every few days as their time period is longer and they need more time to manifest.

Be aware that the market may correct further, as this is a WEEKLY correction in the end, it started last week and so far is continuing into this week, so if you go LONG be prepared to distribute your allocation across several levels in the area indicated.

In the ESH15 DAILY chart below we are showing the price range that we have suggested in the last two days, where the DAILY pullback must end and the market should go higher after that. We have lowered the upper arrow as the market went lower yesterday, so the range is shallower now.

index

TO GO LONG

CCOC – Consecutive Closes Odds Calculator (TIME EXTENSION ANALYSIS)

The TIME EXTENSION ANALYSIS model below shows how many consecutive lower closes (bars) we had on each time period and puts this information in a statistical context.

The DAILY time period gauge shows “2” days down. 74.33% of the events recorded in history are scenarios where the market closed down 2 days and then the next day  was closing up.

The WEEKLY time period gauge shows “1” week down (updated at the end of last week). 57.19% of the events recorded in history are scenarios where the market closed down 1 week and then the next week was closing up. Better than a coin flip, but still not strong enough to make a serious LONG commitment. If this week closes down, the odds to go LONG at the end of the week will be much better.

The MONTHLY time period gauge is showing “0” months down (updated at the end of February).

CCOC LONG

RL – Retracement Levels Odds Comparator (PRICE EXTENSION ANALYSIS)

The PRICE EXTENSION ANALYSIS model below shows how far a price retracement (downtrend) can go on each time period, based on the statistical analysis of all the historical retracement patterns that share similarities with the current retracement pattern.

The DAILY time period offers good support at the 2087.75 level (highlighted below): 69.50% of the events recorded in history are scenarios where the market does not go lower than this level during this type of retracement pattern. This level was hit and briefly breached yesterday and then the market bounced from there, the DAILY pullback is probably nearing an end (if it is not over already). If the market tanks lower today you can see that 2071 and 2045 (next support levels) have really good odds, so they are excellent buy areas, you can safely accumulate LONG positions there.

The WEEKLY time period offers weak support at the 2082 level (highlighted below, best match for the DAILY level). 8.97% of the events recorded in history are scenarios where the market does not go lower than this level during this type of retracement pattern. WEEKLY pullbacks during uptrends usually offer very weak odds.

The MONTHLY time period offers weak support at the 2078.75 level (highlighted below, best match for the DAILY/WEEKLY levels): 3.13% of the events recorded in history are scenarios where the market does not go lower than this level during this type of retracement pattern. MONTHLY pullbacks during uptrends usually offer very weak odds.

The big gauge on the right hand side of the table below shows that 27.20% of the DAILY+WEEKLY+MONTHLY (combined) cases recorded in history, are scenarios where the market does not go lower than these levels during this type of retracement pattern. Overall this LONG setup is not so good, as only the DAILY offers good support, so this can work only for short-term traders, while long-term holders can use the DAILY to allocate some positions on this DAILY pullback, we don’t recommend a big LONG bet from here, it’s probably better to wait more and see if the correction accelerates and maybe good WEEKLY support levels will be reached at that point. The ~2040 area in this sense is interesting.

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RL LONG

TO GO SHORT

CCOC – Consecutive Closes Odds Calculator (TIME EXTENSION ANALYSIS)

The TIME EXTENSION ANALYSIS model below shows how many consecutive higher closes (bars) we had on each time period and puts this information in a statistical context.

The DAILY time period gauge shows “0” days up.

The WEEKLY time period gauge shows “0” weeks up.

The MONTHLY gauge shows “1” month up (updated at the end of February). 36.96% of the events recorded in history are scenarios where the market closed up 1 month and then the next month was closing down. This says that the market can rise this month, or at least that is what it does, on average, after 1 month up: it rises in 2/3 of the cases.

CCOC SHORT

RL – Retracement Levels Odds Comparator (PRICE EXTENSION ANALYSIS)

>>  If you want to receive this analysis every day in your inbox, click here.

The PRICE EXTENSION ANALYSIS model below shows how far a price retracement (uptrend) can go on each time period, based on the statistical analysis of all the historical retracement patterns that share similarities with the current retracement pattern.

The DAILY time period offers good resistance at the 2112.25 level (highlighted below): 58.54% of the events recorded in history are scenarios where the market does not go higher than this level during this type of retracement pattern.

The WEEKLY time period resistance at the 2112.75 level (highlighted below, best match for the DAILY level) is unknown: this model this week is affected by the fact that this pattern was never seen before in history so we have no previous historical events to calculate the odds. This is a very rare case, sometimes it can happen to encounter one of these patterns, but thanks to other parameters provided by our model we are always able nevertheless to assess precisely the WEEKLY trading resistance area, it is highlighted below: 2144.75-2390.50. Until the market reaches 2144.75, it can rise WEEKLY without much resistance, then from there it may start to advance with increasing fatigue as it marches toward 2390.50 (WEEKLY impulse end limit).

The MONTHLY time period offers good resistance at the 2153.50 level (highlighted below, best match for the DAILY/WEEKLY levels): 62.50% of the events recorded in history are scenarios where the market does not go higher than this level during this type of retracement pattern. We have moved the MONTHLY retracement limit to this level because if the market rises towards ~2200 it makes more sense to look at the next resistance point (rather than the preceding 2090 level). 2153.50 is still a sort of a coin flip area, we need to reach 2255 before we can say: OVERBOUGHT. This means that if you are a long-term investor, you can hold: once this WEEKLY pullback is over, the market in theory can go much higher.

The big gauge on the right hand side of the table below shows that 40.35% of the DAILY+WEEKLY+MONTHLY (combined) cases recorded in history, are scenarios where the market does not go higher than these levels during this type of retracement pattern. This reading is negatively affected by the lack of WEEKLY cases to calculate the odds for the WEEKLY retracement pattern, so it shows a value lower than what it should actually be. Overall this setup is certainly not saying to go SHORT, but it is rather inviting the investors to hold their LONG positions and see if the market can go higher, without overweighting LONG positions because the risk of a trend reversal (=downtrend) will increases as we rise from ~2100 to ~2200.

RL SHORT