Chart Analysis
One week ago we have outlined two possible scenarios, after the positive WEEKLY Close:
1) start of a new WEEKLY leg up
2) small bounce before another WEEKLY leg down
Looking at last week’s Close, it seems scenario 1) came true. The ESM15 WEEKLY chart below shows it quite clearly: a big green candle rocketing up >50 points from the latest lows/support area in the ~2040s.
We can see the two black arrows pointing to the next valid WEEKLY support and resistance (around 60% D+W+M combined odds or reversal): a pullback to ~2030 would not change the current uptrend scenario, however it would be better if we could see a smaller pullback in the ~2060, followed by higher prices. Alternatively we could see the index marching towards ~2120 or higher, but it will take some steam and in the past few weeks we have seen a strong price compression between ~2100 and ~2040, so the market will break out one way or the other soon. All we have to do is to wait for the breakout and then look at the odds and when they are good, take action in the opposite direction. These are what we call “turning points”.
Not much to add to the scenarios discussed in the last few days, so here is (again) a recap:
1) we are waiting to see if the uptrend can continue
2) a small pullback is possible, and actually it would be a good occasion to BUY at discounted prices
3) a correction below ~1940 would put in doubt the continuation of the uptrend
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 “0” days down.
The WEEKLY time period gauge shows “0” weeks down (updated at the end of last week).
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. This is slightly favorable to a positive MONTHLY Close for the month of April.
RL – Retracement Levels Odds Comparator (PRICE EXTENSION ANALYSIS)
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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 excellent support at the 2030.75 level (highlighted below): 96.64% 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 means an almost sure DAILY reversal, however it will probably happen before reaching this level. The 2086 and 2080 support levels offer DAILY odds that are good enough to BUY: this retracement pattern is a buy-the-dips type, small pullbacks usually followed by higher prices.
The WEEKLY time period offers good support at the 2033.50 level (highlighted below, best match for the DAILY level). 59.52% of the events recorded in history are scenarios where the market does not go lower than this level during this type of retracement pattern. A pullback to this area could see, once again, a bounce towards higher levels, but at the same time we question the strength of a trend if it keeps going back to the same support area for 5 weeks in a row… it may be “indecision”, of course, but is hard to believe so in our era of (dominantly) computer-driven investment decisions.
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. MONTHLY pullbacks during uptrends are minimal, so this reading only means that we won’t find strong support until we reach lower levels (<= 1993.25).
The big gauge on the right hand side of the table below shows that 64.56% 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 quite good, but again: if you are a long-term investor you should question how strong is an uptrend that keeps going back to the same support area, or lower, for several weeks. Our proposed uptrend scenario must pan out soon, otherwise it means the market is unable to go higher and a correction (or a prolonged sideways scenario) will become the next most likely event.
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 “3” days up. 81.50% of the events recorded in history are scenarios where the market closed up 3 days and then the next day was closing down. This is becoming overbought.
The WEEKLY time period gauge shows “2” weeks up. 68.85% of the events recorded in history are scenarios where the market closed up 2 weeks and then the next week was closing down.
The MONTHLY gauge shows “0” months up (updated at the end of last month).
RL – Retracement Levels Odds Comparator (PRICE EXTENSION ANALYSIS)
>> Click here if you want to receive this analysis every day in your inbox.
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 excellent resistance at the 2122.25 level (highlighted below): 96.72% 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 will almost surely give way to a reversal.
The WEEKLY time period offers good resistance at the 2120 level (highlighted below, best match for the DAILY level): 52.70% 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 will start to offer some resistance to the WEEKLY trend advance, however the resistance is not so strong, so in theory the market could continue higher beyond this point, at least until 2161.50, before finding really strong resistance.
The MONTHLY time period offers so-so resistance at the 2110.25 level (highlighted below, best match for the DAILY/WEEKLY levels): 30.77% 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 can go higher than this – if there is an uptrend.
The big gauge on the right hand side of the table below shows that 60.06% 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 for both short-term traders, betting on a DAILY reversal from these levels, in the hope it will snowball into a WEEKLY/MONTHLY correction, but also for long-term investors that surely do not want to buy at the top, because as we get closer and closer to the ~2250 WEEKLY/MONTHLY area, the chances to have a MONTHLY correction will increase sharply. In these occasions, at these levels, all the long-term investor has to do is… wait. When the price pulls back, an occasion to buy at better, discounted prices will become available, and simply buying at discounted prices versus buying at the highest possible prices will improve the long-term returns versus the benchmark.
