Wednesday, March 17, 2010

ES Forecast for 3/18/10

Right now is a problematic time for charting ES, with the changeover from the H contract to the M contract. So I decided to pull the underlying S&P weekly chart, with a few extra doo-dads:

As you can see, the S&P has been on a three-week tear that has taken us convincingly above the January highs. Having broken above 1150, the next line of resistance is clearly the 1240 area that hearkened the sickening slide of October 2008. There's a long way to go from 1150 to 1240.

But - do you believe in Fibonacci circles? If so, check these out, centered on the March 9th lows. Each Fibonacci level has been followed shortly by a pullack. Only one level remains that has not seen a pullback, or should I say pullback yet - the 1.618. Interesting stuff.

Personally, I now refuse to go against the trend and am willing to just go with the flow until proven wrong. I think we'll break 1200 before long, but maybe not before another short sawtooth down first. Finally note that only seven times in the last 10 years has the Dow gone on a streak longer than seven days (where we're at now).

A pain in the gas...

Last week I started thinking about natural gas plays. Cramer has been trying to pump up nat gas for a while now. For me, there are two ways to play this: either the NG gas futures or the UBS ETF, symbol GAZ. Here's its daily chart:

Now, normally this is the kind of chart that gets my attention. This poor stock has been beaten down hard lately. And unlike a company like Eastman Kodak, its main product cannot be made obsolete overnight by computers. But I got singed recently trying to catch the falling knife in gold (I bought AUY at 10.17. Had I waited another day, I could have had it at 10). So I started waiting for a bottom in GAZ. And waiting... and waiting... I'm still waiting.

So what's up with nat gas? Here's a nice article from Seeking Alpha that helps explain why gas is on the floor. (Executive summary: oversupply):" (for some reason, Blogspot doesn't want to insert links, so you'll have to cut&paste this - it's worth the effort).

As a long term investment, you could probably do worse than gas. Is now the time to buy? Not yet. Like I tell my tell my dog when we're out on a walk and she starts to sniff something smelly, "Leave it!" Even as a short, that bus left the station a while ago.

What Goes Up...

...just keeps on going up? After being badly wrong on the market direction two days running back on the 8th and 9th, I decided to give it a rest for a while. I wanted to say on the 10th it was due to go down again, but thankfully refrained from doing so.

I almost hate to say it, but is the end perhaps finally near? The Dow closed at 10,686 today. This means we have very nearly completely retraced that nasty decline from January. It also means that 10,720 marks the first line of resistance from here. We're almost there. To make matters worse (if that's the right word), my trading account is now on a 14 day winning streak, shattering my old record of 6 days without a loss. Either I've become a much better trader, or we're due for a turn-around soon.

On the other end, 10,575 has become a fairly substantial line of support (blue line).

At least my gold play is panning out. I added to my position in AUY at 10.12 and again at 9.99 while it was consolidating over the last few days. Today it started to move and I believe will continue to do so. The next thing I'll be watching is natural gas. More on that soon.