Hi Slopers, some quantitative analysis of the e-mini S&P500 for you here, courtesy of the TK+RL team.
Yesterday the market tanked and the drop continued overnight, almost reaching our first valid support area around ~2060. The news says it’s because of the Chinese Yuan depreciation and we do not what to discuss that, but only underline the fact that we had predicted lower prices for a while, without knowing what the catalyst would have been and that is how RL works: statistical models can analyze PRICE and TIME extension and tell us where the next market turn may happen, removing the need to know why. The constant search for a reason to explain the market action exposes the investor to both the risk of wong bias and wrong analysis (technical, fundamental, astrological, you name it).
The ESU15 DAILY chart below is showing the next valid support and resistance levels, respectively at ~2060 and ~2110.
The market is currently down for the month, a bounce is possible from these levels and even more possible from lower levels, but most likely all the bounces can be sold (i.e. short-the-rallies) until we reach long-term MONTHLY valid support (2035 or lower) or until the month of August closes down (below 2098.50, although potentially the correction may continue into September).
As explained several times in the last few days in our daily E-mini S&P500 analysis the OVERBOUGHT MONTHLY levels in the price area =>2093.75 will cap any advance and trigger a pullback.
Below is the current valid SHORT model , pay special attention to the MONTHLY levels/odds, as they show the market OVERBOUGHT from 2093.75 and higher (yellow color means odds of reversal =>75%). The PRICE EXTENSION ANALYSIS model 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 will encounter valid resistance at the 2108.75 level (highlighted below): 52.44% 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 will encounter strong resistance at the 2109.50 level (highlighted below, best match for the DAILY level): 61.32% 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 very strong resistance at the 2118 level (highlighted below, best match for the DAILY/WEEKLY levels): 77.50% of the events recorded in history are scenarios where the market does not go higher than this level during this type of retracement pattern.
The big gauge on the right hand side of the table below shows that 63.75% 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. The analysis of these retracement patterns is telling us that the market will very likely reverse from these levels, and, in particular, the MONTHLY odds are very strong, so a MONTHLY pullback is highly probable from these levels. Our view of the market remains bearish, for now.
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If you’re wondering when will it be time to go LONG again, 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 will encounter strong support at the 2061.75 level (highlighted below): 64.20% of the events recorded in history are scenarios where the market does not go lower than this level during this type of retracement pattern. Seeing the market going back down at this level would be a sign of weakness, altough support in this area has already produced a sharp rebound two days ago. This level may be reached again today intraday, and may be breached this time.
The WEEKLY time period will encounter valid support at the 2068.25 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. If lower levels are reached the chances for a bounce increase considerably.
The MONTHLY time period will encounter weak support at the 2059.25 level (highlighted below, best match for the DAILY/WEEKLY levels): 23.81% of the events recorded in history are scenarios where the market does not go lower than this level during this type of retracement pattern. If lower levels are reached the chances for a bounce increase considerably.
The big gauge on the right hand side of the table below shows that 43.01% 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. This setup is OK overall for short-term trading but the problem is that the MONTHLY SHORT model is showing a very OVERBOUGHT condition already from 2118, so this is like to say that if the market rises, there is not much room for profits (unless you want to hold beyond 2118, which is potentially risky). Ideally what we would like to say is a dive to much lower levels, and a negative MONTHLY Close for August. If that happens, then the market will be mildly OVERBOUGHT and starting to buy could make sense again.
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