Yesterday the market tried some recovery, amidst a flurry of news coming from Athens, Brussels and Berlin, regarding the risk of Greece defaulting on its debt. The bounce had retracted completely by the end of the day, but overnight the market is trying again the same rebound, so today the Close may be positive.
In the ESU15 DAILY chart below we can see the next valid support and resistance levels and we have highlighted the fact that the market will reach 100% odds to go SHORT DAILY at the 2091 level. This means that based on our DAILY model reading, the market is already OVERBOUGHT and marching towards a 100% OVERBOUGHT DAILY condition. A new pullback is nearly sure to happen before then. It is hard to say if it will be another sharp pullback or just a small one followed by higher prices. We can only say that when the odds are good, LONG or SHORT, you must take action to profit from the upcoming reversal.
Overall this could be a good moment for Bears as the possibly negative implications of a Greek debt default favor a sharp pullback/correction and thus we are offering you this information to show you where resistance is, so that you can go SHORT and make the most of what may come out of Athens in the next few days…
The Retracement Levels 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.
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The DAILY time period will encounter extremely strong resistance at the 2075.50 level (highlighted above): 96.08% 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 market is roaming in a very overbought area at the moment of writing (~2066) – this area was already reached yesterday and triggered a pullback – so it can rise higher but it is reaching the limit for this DAILY impulse.
The WEEKLY time period will encounter no resistance at the 2096 level (highlighted above, best match for the DAILY level): 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.
The MONTHLY time period will encounter valid resistance at the 2078.75 level (highlighted above, best match for the DAILY/WEEKLY levels): 45% 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 MONTHLY SHORT will certainly start to influence the market advance from here.
Additionally we can see that the 2093.75 and 2118 levels are offering very strong resistance (2118 >75%) and this is bad news for any medium-term bullish plan because by the time we get to these levels (i.e. the most recent all-time highs area), the MONTHLY will be statistically OVERBOUGHT and thus further advance is going to be difficult (not impossible, but rare and difficult, on average).
This does not mean the market cannot advance in the next few months, it only means that a MONTHLY pullback (i.e. one or more MONTHLY negative closes) must happen from these levels before the market can go higher. Imagine a zigzag where a zag down is necessary before making a new zig up. Note: the zag down will be limited in size by the LONG support levels (i.e. the new zig up will start when strong support is met).
The big gauge on the right hand side of the table above shows that 47.03% 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 telling us that at these levels the market will start to near a coin flip probability to reverse and pull back to lower levels. Overall this setup is of interest to both short-term traders and long-term asset allocators.
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