Tuesday, December 11, 2012

Mixed Futures Charts

I have tons to look at and keep tabs on, but as I go and I notice extraordinary events, I want to share them as it helps you understand the process that is unfolding, it helps you understand correlations, how to confirm or see problems with a price move, etc.

ES (S&P E-mini Futures)
 This is this morning's 1 min chart provided for context, to the far left the time is 11 p.m. EDT (yesterday), where volume picks up is the 9:30 New York open.

 Zooming in on the same chart from 4:30 a.m. today to present, there's a negative divergence in to a price spike and then a leading negative divergence, this is what I'm looking for on these moves up in which we suspect a head fake, we are looking for signs that price strength is being sold in to, that helps us confirm a head fake or false break out move and that helps tell us whether we may be close to a sharp reversal in which we can take short positions (in this case) that have very little risk and a lot of potential-(basically the area in which I would add the final position in a phased in trade).

What we still want to see is migration through the other timeframes, that gives us stronger probabilities.

 The EUR/USD Spot which was showing a positive divergence yesterday, the Euro has a positive correlation with the market and helps or even sometimes drags the market higher. This also has a lot to do with the $USD which has an inverse relationship with the market.

This leading negative divergence in the pair is new, it's the deepest 3C move on the chart, it's one of the early signals that the move up we saw as very high probability in the Euro/market yesterday, is also seeing distribution and could be preparing for a sharp reversal to the downside (along with the market). These currencies are important confirmation assets.

 The longer 5 min EUR/USD chart is also showing a loss of 3C momentum, especially right before the pair made a small, but strong move down.

 This is the Euro Future alone-no $USD, the 1 min chart here shows 3C distribution in to the highs of the Euro and the Euro lost ground from there, this effects the pair and it effects the strength or support for the market, this is market negative.

 The longer 5 min chart shows a better / longer trend, it too has turned decidedly leading negative.

 And the 15 min chart from a positive at the lows to a negative building in.

 This is the US Dollar Index 1 min with a small positive divergence, which is the opposite of the negative divergence in the Euro, thus confirmation.

 This is the USD Index 5 min chart with a positive divergence in to the pullback, this is market negative and matched s the Euro for confirmation.

The USD Index 60 min chart shows the trend and a positive divergence that got the USD headed higher, the break in momentum that really came from last Tuesday's change in the market, which again as I said yesterday I view as a transient event, is not much of a problem here, it's not negative on the $USD Index, it's just in line so again the currencies are pointing toward the downside for the market just as I showed in last night's post with the longer charts exerting a gravitational pull that the market should give in to. We needed an event like this because of averages like the IWM's range and the 50-day, these kind of events I also view as transient and kind of like a primer to kick start a bigger trend (reversal in this case).

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