Chart Analysis
Yesterday the ESM15 market closed down again. The ESM15 DAILY chart below shows the support and resistance levels discussed in the LONG and SHORT sections below.
As you can see there is more room to go up than down, before reaching DAILY levels that will offer some meaningful opposition to a continued advance. This means that in theory the path is clear to go up, and combined with the fact that today is (at the moment of writing) the third day down in a row, a bounce is becoming more and more possible as we will see in the TO GO LONG section below.
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. 74.35% 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). 57.13% of the events recorded in history are scenarios where the market closed down 1 week and then the next week was closing up.
The MONTHLY time period gauge is showing “1” month down (updated at the end of last month). 62.16% of the events recorded in history are scenarios where the market closed down 1 month and then the next month was closing up.
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 2036.50 level (highlighted below): 51.79% 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 is the first DAILY level where a LONG trade has good chances of success. Incidentally it also closely matches the support reached a few days ago and yesterday. The next support is at 2012.50, very strong.
The WEEKLY time period offers valid support at the 2048.50 level (highlighted below, best match for the DAILY level). 41.03% 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 gives strength to the DAILY setup. Next support is at 2017, good odds.
The MONTHLY time period offers so-so support at the 2032 level (highlighted below, best match for the DAILY/WEEKLY levels): 37.50 % 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 support as well offers some support to the DAILY/WEEKLY setup, although not very strong. We need to go to 1993 to see more serious support, but if the market goes there we will have to wonder if the latest uptrend still has legs.
The big gauge on the right hand side of the table below shows that 43.44% 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 good, although most if its strength comes from the DAILY time period, so long-term allocators must thread carefully here as we have not reached yet WEEKLY/MONTHLY supports from where long-lasting uptrends can unfold.
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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 “0” months up (updated at the end of last month).
RL – Retracement Levels Odds Comparator (PRICE EXTENSION ANALYSIS)
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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 valid resistance at the 2085.50 level (highlighted below): 63.76% of the events recorded in history are scenarios where the market does not go higher than this level during this type of retracement pattern. This level is only of interest to traders that want to go SHORT because they believe the market will go lower from here, this is a good resistance point to start to build a SHORT position.
The WEEKLY time period offers weak resistance at the 2078.25 level (highlighted below, best match for the DAILY level): 16.22% of the events recorded in history are scenarios where the market does not go higher than this level during this type of retracement pattern. This does not support the DAILY SHORT trade, however it is only relevant from a long-term point of view, or in other words it does not point to a good chance of WEEKLY reversal (that would require a value =>50% on the WEEKLY gauge).
The MONTHLY time period offers no resistance at the 2079.75 level (highlighted below, best match for the DAILY/WEEKLY levels): 0% of the events recorded in history are scenarios where the market does not go higher than this level during this type of retracement pattern. This means that from a MONTHLY perspective the market usually goes higher than this, unless it is already going down and thus it never makes it to this level from the current, latest MONTHLY negative Close (2060.75 on 31st of March 2015).
The big gauge on the right hand side of the table below shows that 26.66% 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 setup is interesting only for short-term traders, betting on a DAILY reversal from these levels, in the hope it will snowball into a WEEKLY/MONTHLY correction. That would be the scenario 2) or 3) that we have discussed yesterday in this report.
From a long-term point of view, our forecast for the end of the trend stands: we can see 2269 as a very strong resistance level, so we confirm that once we’ll reach the ~2200/~2250 WEEKLY/MONTHLY price area, the index will most likely begin a MONTHLY correction. Going SHORT, selling or hedging LONG positions is recommended in that area.
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