emini SP technical analysis april 19-2010

 It’s time to do a bit of technical analysis and chart work

Yesterday when I thanked Goldman Sachs for re-introducing volatility into our markets, I hinted at the fact that we may be a smidge overbought.

In fact in the chat room I have been talking about a particular price level 980 for some time now.

We have not had a trigger (yet) that would get us swing short looking for that level, but we are getting close.

I’ve done a bit of chart work that you can see from my daily chart of the ES (eMini SP) below.

When I look at longer time frame charts like the daily I must admit that I use some very conventional indicators. Why overcomplicate the matter.

We can see from the chart that we have hardly had any pullbacks to speak of in months. The congestion area of approx 980 to 1120 remains untested.
What is lining up rather nicely is the confluence of indicators at various levels.

Confluence:
1140 area:  prior highs, and 38.2% Fib Retracement and 50 Day MA
1068: 38.2% retracement from July Lows, and 200 Day MA

Indicators:
The DMi+ and DMi- have been diverging from price since mid March
The DMI has not been in a sell mode since March
The RSI has been overbought since March

All indications point to a highly overbought market. It has been this way for some time, and we have yet to get a confirmed trigger on the short side.

With the new recent volatility caused by the S.E.C / Goldman Sachs situation the SP’s have at least broken out of their daily ranges.

The Trade:
For a satisfactory sell signal I would need the market to retest 1184 from beneath it on diverging internals, without those circumstances we continue to wait.
The right trimming combined with a confirmed trade setup is critical; there are potentially 200 points to the downside available let’s not jump the gun by entering without confirmation.

 Join us for a 7 Day Live Trial of our Live Trading Room

[MyChart is Below]

Good Trading

Category: Market Commentary