DOW E-mini Weekly Report 30th Dec 2007

At the end of this Monday 31/12/2007 will be the last day of trading for 2007 completing an eventful year. It also shifts major timeframe levels in all global markets.

The major timeframe being the Yearly or the ‘Primary timeframe’.

Above is the Weekly chart of the S&P cash, what this chart is showing is the Yearly timeframe dynamics along with certain levels around the 3-month lows that often act as support.

We can see the rise up into 2006, continue higher into 2007, and now the upper resistance in 2007 will shift much higher, so any further upside in 2008 will have a higher timeframe path to travel towards.

The red line is the Yearly balance point, and we can see that price is going to open right on ‘fair-value’ for 2008:- Above fair value and expectation that S&P is moving higher, and below it is moving back into major support and the 3-month lows once again


When we look at the monthly charts of the S&P cash market, we can see how this Yearly balance point is a major trend guide each year; on the way up, and on the way down.

The only recent time below the Yearly BP was a 2-week sideways pattern in 2005, before the trend resumed higher.

A lot of traders are calling ‘bear’ markets for 2008, using my model a bear market definition can’t occur until price is trading below 1393 in 2008, and if that is the case then the expectation is that price is heading back down into 1210. (2-year pattern)

However, over 100 years of decade cyclical patterns every year ending in ‘8’ has been up. Does that mean 2008 will be up?… Who knows

Fundamentally things aren’t looking great, talks of recession in the US, and the housing crisis yet to filter right through the economy, the market might not fall over but we could have another congestive-sideways pattern like in 2000 before things fall over in 2009.

In conclusion:- YearlyDynamic highs in 2007 stopped the market rising higher, resistance shifts in 2008, so the S&P can make higher highs in 2008. (resistance disappears)

The Yearly balance point:- of 1469 is going to define the larger trend in 2008. (Cash Market)



DOW CASH market is the same:- 13157 is the Primary trend guide, with major ‘fair-value’ around 12500.

We can also see that 2007 resistance will shift higher, so that any UP trend in 2008 can move much higher in 2008. Or much lower if it breaks 12500 confirmed with a Monthly close below this level.

DOW Futures:-

This week’s expectation was a lower Weekly close, this was confirmed by the failure of the 3-day lows on Friday. A lower Weekly close this week, has the potential to send the market down into another lower Weekly close.

And at this stage with price trading below all higher timeframe 50% levels and the 3-day SELL cycle, my expectation is that price will be under pressure early next week.

Looking for a push down into 13304, a break of this and expectation that next Week will push much lower. There are ‘Drops’ in the forward Weekly timeframe which also favours further downside.

Note: any push down next week will see markets down towards the Yearly BP @ 13157

E-mini Futures:-


There is a slight difference on the E-mini:- even though all short-term indicators are ‘SELL’, futures market isn’t that far away from the Yearly BP (1469)

The level which is critical on E-mini is 1472:- A bullish set-up would be to bounce off this level and ‘HOOK’ back inside 1492. (January 50%)

Trend:- Bearish below 1492 (January 50%)

Trend guide 1469 :- extremely ‘bearish below; 1469 (Yearly BP)


DOW and E-mini intra-day..

On Friday the DOW failed at the 3-day break and moved down into support, E-mini followed the pattern lower after an early push upwards before the Weekly trend pushed it back down into support.

When there is a divergence of both channels into ‘dark-blue’ the breakout is much more valid.

Short-term trend defined by 5-day 50% level for Monday

In conclusion:-

Short-term the trend is defined by January 50% levels, and breakout of the lows on Monday @ 13338 and 1477 is extremely bearish.

A bullish pattern early in January would be to see a push down into support based on the ‘Yearly BP’ in both markets and then bounce back above the January 50% levels….


Follow the Daily Reports in the ‘trader trading’....

DOW E-mini Weekly Report 22nd Dec 2007

Last week’s ‘model of expectation’ was:- a push down on Monday, and ‘hook’ day on Tuesday, and then a continuation into higher prices on Friday.

After Wednesday’s down day and failure from the 5-day 50% level, I didn’t think the higher close on Friday was going to come about, but this was simply verified by the break of the 3-day cycle high and trending UP day.

There was a forewarning of higher prices with the forward ‘Weekly Rises’, and also the week of contract expiry, which often pushes prices higher into the Weekly close.

Last Week’s expectation was that after the UP week, the following week has a much greater potential of heading down. This is still my view , however it needs to be verified with both the Weekly and December 50% levels.

3-day change of cycle:- Expectation of a reversal back into the previous break before the trend continues. This normally happens over 1-2 days.

A change of cycle can stop at the break @ 13385, and then continue higher the next day, or it can easily continue back down over two days back into the 3-day lows @ 13229.

The same applies to trading the E-mini :- expectation of a reversal back down.

Technically:- both markets are now bullish, they are trading above higher timeframe 50% levels, and whilst price is above those levels, the trend remains up, and it can continue up into the end of the year.

However:- Forward modelling favours a rotation down, because of two repeating patterns….

1. Higher Weekly close and expectation of a 2-day reversal before the trend continues upward.

2. a change of 3-day cycle, and expectation price will rotate back into the previous break, and or the 3-day lows.

If either of these two patterns play out, price will be back under the higher timeframe 50% level, and will have more of a chance to move down next week, than head upwards.

The close of the last day of the year will be important, because it sets up the Primary Trends for 2008.

And statistical, years ending in ‘8’ have never experience down-trending years....

E-mini DOW Weekly Report 15th Dec 2007

Last week my expectation were for US markets to continue higher, but I also modeled that there was a potential for a lower Weekly close before heading higher next week.

Whenever the market closes on it's highs on Friday (previous week), the expectation is that the following week will rotate down re-test support and then continue higher. This occured but the follow through further UP didn't eventuate.

This week saw the Weekly 50% levels support price for a number of days, before Friday moved down into a lower close, as this was expected after the 5-day 50% level became resistance on Friday.



Technically the market is weak:- it’s trading below all major 50% levels, the 3-week cycles are ‘sell’ and the 3-day cycles are ‘sell’

But next week the Weekly 50% level is going to continue to define the trend, and can easily become support and the market swings upwards next week. (lower weekly open closing higher on Friday)

Next Week traders should be trading March contracts, but the same levels should be used:- support is 1467, and the week of contract expiry normally tries to move higher


DOW:- is exactly the same, expected push lower next week but 13299 is trend guide for next week.

I’m trying to ‘forward model’ next week, and by looking at market dynamics and repeating patterns it favors higher prices or rotating price action.

Looking at global markets and the current price action, most would naturally think markets will continue down, and it can because of price below the higher timeframe December 50% levels, but repeating patterns often push prices upward next week from lower weekly opens.

The highest-probability pattern next week:- would be to see lower prices on Monday, break below the Weekly 50% levels, but the next day ‘hooks’ back inside. This then becomes support and prices rise higher into Friday.

The weekly 50% level next week is going to be the trend guide and support, just as it has been in down trends and up trends each and every week.

In conclusion:- My expectation is that markets are consolidating into the end of 2007, and if that is the case, it wouldn’t surprise me to see rotating UP week (closing higher than open), before having another down week after expiry.

By Analyzing the larger timeframes, the market looks like it’s consolidating for the rest of the 2007, closing out December to set up the major Primary levels for 2008:- 3week sideways pattern into the end of 2007 guided by the December 50% level.

The Yearly timeframe is the driving force for major global trends.

The potential of any major rally towards 1555 is now much less likely, because March 2008 contracts are now trading below the 3-week cycle highs. (1525)


Please refer to the Daily reports....

DOW E-mini Weekly Report 8th Dec

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This week saw the 2-day reversal into Weekly 50% level, support and then on Wednesday (BUY Day) the market broke the December 50% levels.

December 50% level is now Support with the expectation that price is moving towards 13970 as the first reference point.

As the 3-day cycle and Weekly 50% level guided the market down within the monthly timeframe, the change of cycle along with price trading above the same levels will guide the market upwards.



The market has closed on it’s highs on Friday, so there is a natural expectation that price will rotate back down for two days, or find support above the December 50% levels before the next wave higher.

1 Daily reversal down needs to be verified with support, before trading longs higher the next day from a lower open.

Trading is simply about trading trends, cycles and importantly using support and resistance each day.

Even though the trend of the market has been modeled to move higher, not every day is an UP day, with the 5-day 50% levels the best guide on the strength of the trend next week.



The figure above shows the Daily chart of the DOW cash market:- Each time is gets towards the lows of the past 3-months, the market rises. And again its occurred in November supporting the market and forward modeling suggests it’s going to rise higher in this month.

When we look at the same chart there are the 3-week cycles, just as the 3-day cycles guided the trend down and up within the monthly timeframe, the 3-week cycles guide the trends within the Quarterly timeframe.



When did the last break occur? The Week of expiry….

The closer it gets to December contract expiry the more chance it has of moving higher.


But the question then is:- does it break higher next week (interest rate news, which has been driving each daily rally) or does it rotate down 1 week before rising upwards from a lower weekly open the following week?

Please refer to the Daily report for trading US Index Futures.

US Index Report 1st December 2007

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“My expectation is for a continuation back towards the Weekly 50% level and move higher towards the new monthly 50% level in December before the next move down towards the December lows, as it follows the Dilernia Principle of a 2-timeframe wave pattern in lower lows before any major support and new UP trend can develop in 2008....

In Conclusion:- Major support in November has been found, expectation of a rotation upwards next week and into the end of the Month before December provides a 2nd wave down into December lows.

Support is only valid for the current timeframe, once November ends and December begins there will be a new path for price to follow and the same support won't be valid. (US Weekly report 24th November”)



DOW...

It all started off in October the first warning of a reversal. The Weekly
‘drops’ were forewarning weakness and the break of the Weekly 50% level confirmed the trend, and the continuation down that was clearly defined by the 3-day cycle and into the First reversal point:- the October 50% level.

After the 3-weeks of consolidation around the monthly 50% level, once price broke, the market path was already mapped towards the November lows before finding support, and this week moving in a counter-trend back towards the December 50% level.

The December 50% level in both markets is going to clearly define the trend.

There is such a large gap to the 3-day lows, that with the start of the new week (high probability of a 2-day reversal from a higher open) that the next 2-days on US markets are going to give a good idea about how the next 2 weeks of trading are going to play out.

Because around these higher timeframe 50% levels there is major resistance, and both markets are also trading below the Quarterly 50% level. The Secondary trend is bearish. In the SPI it hasn’t even come close to testing the same level.

Below the Quarterly 50% levels in both markets and there is more of a reason to reverse back down. However the closer it comes to contract expiry the more probability it will move above.

ES-minis

The exact same technical view as the DOW:- whilst below the December 50% level the trend is down, however the short term trend is up defined by the Weekly 50% levels and the 3-day cycle.

And with the closure of November the lower lows in December are not that drastic, it will be like re-testing the market, as a ‘double bottom’ completing the 2nd wave pattern (Dilernia Principle)

Previous US index Weekly report: - This week expectation was that the November lows would swing the market back upwards to the December 50% level and stall. Major resistance.

This US index Weekly report:- major resistance with a high probability that whilst price is trading below December 50% levels, the market will make a lower low. However this needs to be verified by the break of the Weekly 50% level and 3-day cycles, which might take a few days to unwind.

Short-Term:- higher Weekly open and expectation that there will be a 2-day stall reversal with the Weekly 50% levels a guide of the strength of the trend.

The closer it gets to December contract expiry the more chance it has of moving higher.