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Swing Trends Daily Newsletter

Swing Trends Daily Newsletter

ES E-mini & Futures Outlook & Technical Analysis

I s s u e

# 2 3

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T h u r s d a y

1 8 th

J u n e

2 0 0 9

Disclaimer & Risk Warning

Trading in any type of financial instrument or security has large potential rewards but also high levels of risk. In some circumstances you may be able to lose more than your original investment. You must be aware of the risks which are present in trading any type of fina ncial instrument or security and should carefully consider whether trading is suitable for you in light of your circumstances, knowledge and financial resources. Additionally, you should make your own independent evaluation of the relevance and adequacy of the information contained in t his material and make such other investigations as you deem necessary, including obtaining independent financial advice, before participating in any transaction in respect of the securities or instruments referred to in this material. Material provided in this newsletter is intended for informational purposes only and is not to be considered individual financial advice. It is not an offer to buy or sell, or a solicitation of an offer to buy or sell any security or instrument, or to participate in any particular trading strategy. Those who receive this newsletter acknowledge they are solely responsible for their own trading style, techniques and results and are as such are solely responsible for any profit or loss which may result from it. THIS MATERIAL IS NOT INVESTMENT RESEARCH AS DEFINED BY THE FINANCIAL SERVICES AUTHORITY. Past performance is not indicative of future results. CFTC Rule 4.41: Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record simulated results do not represent actual trading results. The effect of market factors, such as, but not limited to a lack of liquidity, may be under or over represented. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown.

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S&P ES E-mini & futures Outlook for Thursday 18 th June 2009

Economic Releases due today:

04:30ET [Switzerland] SNB Interest Rate Decision 04:30ET [UK] Retail Sales data & Money Supply 06:00ET [UK] CBI Industrial Trends Survey 08:30ET [USA] Jobless Claims 09:00ET [USA] Tim Geithner due to speak 10:00ET [USA] Leading Indicators 10:00ET [USA] Philadelphia Fed Survey 10:30ET [USA] EIA Natural Gas Report 11:00ET [USA] 3 & 6 month Bill and 2,5,7 year Note Announcements 16:30ET [USA] Fed Balance Sheet 16:30ET [USA] Money Supply data

Please see full disclaimer & terms of use and updating economic calendar at: http://swingtrendsweeklypreviews.blogspot.com/

Commentary:

Good morning everyone! From today you will notice that all the charts on this website are now the ESU9 futures contract (September expiry) and the reason for this is options expiration! Historically near to the time at which options expire, increased volatility has been observed within the financial markets as traders scrambled to cover positions and roll them forwards. However, in recent years (it is suggested that, due to the increasing efficiency of the markets) this effect has lessened somewhat and whilst I will be exercising some caution today around the time of expiry in trading, options expiration is certainly not as prohibitive for me as it is for some traders, who refuse to trade at all on options expiration days.

It used to be the case that the Wednesday before options expiration was termed "Weird Wollie Wednesday" (a term coined by Don Wolanchuck) to describe the strange and volatile price movements that often occurred (it was suggested) due to faster deterioration of options premiums during the week prior to options expiration. Although, W.W.W. was fairly quiet yesterday and has been across recent times supporting the suggestion that volatility near to options expiration is less than historically has been the case.

Moving to todays charts, a defining factor in todays trading is likely to be the bullish descending wedge that price broke from the upside of during yesterdays US session.

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may result in subscription being voided & legal action Having broken this wedge though and challenged

Having broken this wedge though and challenged the 200sma(15), price has now put in a lower high, meaning that my intraday trading bias remains neutral at this time. Currently 15min Gann swing trend is neutral/down, whilst price is underneath the 200sma(15). In order to turn this bias to up, the 914 area of resistance would have to first be decisively broken to the upside. This would both put price above the 200sma(15) and in a 15min Gann swing uptrend. In order to turn this bias decisively to down I would like to see a break of the 906 area of support. The trend-lines of this wedge are likely to remain important support in the near term and certainly have the propensity to alter price movement over the course of today. Additional important support and resistance likely to shape todays session is highlighted below.

the course of today. Additional important support and resistance likely to shape today ’ s session

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Clearly, with multiple levels of prior price respects across time frames and both the daily central pivot point and weekly S2 pivot point in the 906 area, this region of support is expected to be particularly strong today. Similarly, the 914.5-912 band of support is likely to be strong given a similar level of confluence in this region.

I wish you the best of luck today! See you all in the chatroom!

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Featured Trading Idea & Additional Analysis

Having profited very nicely from Monday and Tuesday this week, it was of little consequence to my mind to sit aside from all but scalps yesterday in a market environment inherently more risky and less predictable than it was earlier in the week. Whilst we had a trade planned, the market did not oblige us by fulfilling that plan and so we stayed out trouble on a day with more choppiness than any other day in the past month (count the sheer number of individual 15min Gann swings yesterday) and which offered no conservative, repeatable, high probability trading opportunities.

Despite options expiration, I will be serving up a featured trading idea today as I feel the market is very much poised to offer yet another of these high probability trading opportunities which we have seen so far this week. Potentially of more concern to me today than options expiration, is the multitude of economic news releases throughout the trading day. I am always wary of entering trades near to and holding trades through such economic releases as I believe not only is it very difficult to accurately predict the outcomes of any given news release, but also potentially even harder to accurately predict market reaction to the economic numbers released. Events particularly likely in my opinion to move the market today are the jobless claims data (due for release pre-US open) and the Leading Indicators(due for release shortly after the US open). However, I will also be showing the bond announcements at 11:00ET greater than normal respect today due to the large number of note and bill announcements occurring at the same time. Should I be in a trade approaching a news announcement today, I will certainly be considering scaling out of positions prior to the releases and/or using active stop management to dramatically cut my risk exposure.

Returning to todays charts, as I suggested in the publically available commentary today, I hold a very much neutral bias for the ES at this time. Not only are the 914.5-912 and 906 areas between which the market is currently consolidating important on a 15min timeframe in determining Gann swing trend, but also on an ES 60min chart.

on a 15min timeframe in determining Gann swing trend, but also on an ES 60min chart.
ES 60min Chart 914-912 906
ES 60min Chart
914-912
906

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One can clearly observe multiple respects of both levels and this, coupled with the multiple layers of confluence outlined in the publically available commentary makes them both very important levels into today.

Yet, in which direction is the market likely to break from this consolidation? And in which direction is a breakout likely to give us sustainable and high probability trading setups?

Considering the 4hr ES chart with Bollinger bands, which has become something of our guide to medium term volatility of late, one can clearly see the contraction of volatility that began yesterday has been maintained through todays European session.

has been maintained through today ’ s European session. ES 4hr Chart Continuing contraction of volatility
ES 4hr Chart Continuing contraction of volatility increases likelihood of current lows being held in
ES 4hr Chart
Continuing contraction of volatility
increases likelihood of current lows
being held in the 900 region and also
means that any short trades beneath
906 will be very limited in terms of
profit targets and subject to
potentially sharp reversals.
#A
#A

This contraction of volatility makes it increasingly likely that lows in the 900 region will be held (for the short-term) and that any short trades beneath 906 will be very limited in terms of profit potential and also possibly subject to sharp reversals.

This view is also supported by an alternate illustration of the trendline marked #Ain the diagram.

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ES 4hr Chart
ES 4hr Chart
#A
#A

Alternate

interpretation

With this alternate interpretation of the trendline in question, not only is price at horizontal long- term support, but also yesterday made a return move to this previously broken trendline. The presence of this trendline would also limit further sustainable downward movement on a break of

906.

Consequently, todays featured trading idea is a long trade based upon a breakout of the consolidation we have been seeing on the 15min and 60min charts to the upside (please see chart overleaf). Upon decisively breaking the 914.5-912 multi-time-frame resistance area, a trading opportunity may be presented on the return move to this area as a role reversal area with multiple confluences.

A potential profit target today is suggested to be the 921 area. Not only is this area resistance in the form of the daily R2 pivot but this area also represents 95% of daily ranges and is very much a region that other traders holding long positions will be looking to take profits in. Additionally, should one consider the current consolidation to be a longer time-frame inverse head and shoulderschart pattern (see 60min chart on the very last page of the newsletter), with the neckline in this 914 area, the measured move price target for this chart pattern (which would be activated on a decisive break of the 914.5 area) would also be 921-922. Lastly, this region also represents the 38.2% Fibonacci retracement of the recent decline from the highs yet another layer of confluence suggesting that profit taking would be likely in this area.

Good luck to you all today!

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ES 15min Chart

PROFIT ZONE 921 914.5 ENTRY ZONE 912
PROFIT ZONE
921
914.5
ENTRY ZONE
912

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Time is BST = ET +5hrs

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may result in subscription being voided & legal action ES 60min Chart Inverse “Head & Shoulders”
ES 60min Chart Inverse “Head & Shoulders” Target = 921-22 on break of neckline
ES 60min Chart
Inverse “Head & Shoulders”
Target = 921-22 on break
of neckline
& Shoulders” Target = 921-22 on break of neckline ES 4hr Chart Fibonacci retracement as potential

ES 4hr Chart

Fibonacci retracement as potential profit target