ES - Tuesday was a fed day leaving us with historical low interest rates. As a result, bonds flew to new highs we've never seen. The bonds monthly chart just looks rediculous (see very last chart here).
Building the bearish argument for the ES:
- Typically, as bonds rise, the S&P falls. With the rise we saw yesterday in bonds, this should cause the ES some pressure.
- On the daily chart below, there is divergence in the momentum indicator (green line) as we reach a double top of 12/8. This shows weakness.
- We are over bought on the stochastic
- We still have the 921 level (see chart below) holding and failed to get as high as the 12/8 high. Again, this is a 180° retracement from the 720° bottom (720-180=540).
- Putting in a reversal pattern (as described here) and illustrated here:
- Made an initial move in a multiple 90°. In this case a 180° move up from 720°.
- Bounced down a multiple of 45°. In this case a 90° move down on 12/12.
- Returned to the original level of part 2 above by making a 90° up move.
- Reverse direction. In this case, down to eventual new lows.
With this logic, it would make sense to sell right after Tuesday's close. The chart below shows we are doing just that (overnight action is the latest red bar). We are currently at a resistance line, as you can see.
I feel we will continue down to the upward-rising resistance line at (895) and find resistance. I would like to see the bears push us below all those blue resistance lines, so we can continue downward. In any case, look for strong resistance at the mid 890's, perhaps enough to cause a rally from there.
Good hunting!
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