In order to see where the market is at, we are going to examine the E-mini S&P500 futures. (@ES in Tradestation). Since March 2009, we have had a nice move up. From the low of 653.25 to the high 1148 the week of Jan 15, 2010, we have moved 75.09% over a 45 week span. That is a very nice move that a lot of people did not expect. This is roughly a 50% replacement from the high of 1589.50 during the week of Oct 12, 2007. Now what? Is this a pull back we are experiencing or a trend reversal? Let’s examine the Ichimoku charts to determine what is going on in the market.
Below is the weekly chart of the @ES. Today, we reached the Kijun Sen for the very first time since the move upwards. A couple of times, we penetrated the Tenkun Sen but we never have reached the Kijun Sen at all. A major pull back is definitely occurring at this time. Where the pullback ends is a big question? Also, will the major pullback cause a trend reversal is another question? There is no way we can tell at this time. One thing we know for sure, if a trend reversal is to occur the Kumo Future needs to go bearish along with the Chikou Span. Both indicators are far from going bearish at this time. The Chikou Span could go bearish with a further downward movement but it would enter a huge Kumo cloud which would cause major consolidation. Based on this, it seems like we are in for a very “rocky” ride until the week of March 19, 2010. We may go lower but it probably will not last due to the Ichimoku elements being in conflict. This tells us that we should be very cautious in taking any long term trades at this time.
Below is the daily Ichimoku chart for @ES. This chart shows that all the Ichimoku indicators are bearish. However, the Kijun Sen will enter the Kumo cloud if anymore downward movement occurs. This will cause price to consolidate. Also, notice that price has moved far away from the Kijun Sen and the Tenkan Sen with the huge price movement today. This will cause some equalization to occur sooner or later. The next major support is at 1042 since we broke the support of 1061 today. Caution is the “word” for now for any bearish trade. Maybe, if price pulls back on the daily chart to the Tenkan Sen at 1081.36 then we would look for a possible short term bearish trade off the daily chart. Right now, we are going to be PATIENT and wait for the market to tell us what to do……DO NOT GO CHASING THE MARKET!
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