Homework for Tuesday 2008.12.09

8. December 2008
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ESZ8 - Friday left us at a pivotal point.  I was expecting a fall on Friday and on Monday, but instead this action is making me take a stance I've been fighting for a couple weeks: being short-term bullish.  I mentioned this scenario in last Thursday's HW.  However, now that I'm giving in, it may be a bit late.  Ever since 11/21, we had an Advanced GET, Type 2 bulllish setup.  We bounced off the MOB (first, big green bar), the Oscillator showed divergence compared to price.  The Type 2 seems to have worked as expected. See chart below.  I saw it back then, but I didn't want to buy into it, since all we get is negative reports and "the sky is falling" situations all over Wall street.

However, that bullish sign may be done playing out, right here.  I say that because we retraced to the 61.8% level (906), we have the AGET stochastic setup (Oscillator returning to zero, "false bar" showing down trend, and stochastic overbought).  If we start falling, a preliminary target for the next leg down is about 703 (second MOB).  However, overnight data should give us some indication where we may go tomorrow.  We are currently resting on a crutial 897 area.  Does the Type 2 setup have some more juice?  Or, is it time for the bears to re-gain control?

Tuesday will be a tricky day.

  • If we bounce up from here, look to sell 921 area again tomorrow (yesterday's high and very important 180 degree Gann level (see Gann lesson, Part II). Look for resistance at this 897 level again on the way down.  
  • Look to buy 874.25 to 880 (50% line to maroon MA).  Also, an intra-day gann calculation on Monday's high, puts a 360 degree rotation at 881.
  • If we continue down in the overnight action, look to sell a rally back up to 897, down to that 874-880 area.

 Good hunting! 

Homework

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