S&P500 E-mini (ES) Analysis & Potential Scenarios, November 12th 2012 (English Language)

Good morning,

hereunder a video-analysis for the S&P 500 E-mini futures (ES):

In the last few weeks I have contemplated the possibility of a crash of the US stock indices and I have also published an article titled “Will the US stock indices collapse?“, in which I report on the possibility of the S&P500 reaching 565 in 2014 and on a potential divergence between the Euro forex cross and the S&P500.

In the above video analysis I show the potential for Program Trading to push S&P500 price down in the coming weeks. The sequence of measured moves on the weekly chart is clear and the next support area in this timeframe is located down at 1130. That level corresponds to the previous lows in March 2009 and May-July 2011 when the FED clearly intervened in the stocks market, saving it from a crash or, at least, much lower prices with QE1, QE2 and Operation Twist.

This year, quite strangely, the FED initiated QE3 at highs. Okay, it is open-ended, but still why at highs? In fact, it looks like this year QE3 has been engineered in a way that seems not to be able to protect stocks from a free fall.

I identified a few important price levels in the S&P500 e-mini that we will need to monitor closely. First of all it is important to notice that the 1358 area did not trade, just yet (price stopped at 1363). The 1358 area is an important support area but as of now the S&P500 is still in a free fall. There are two areas of resistance above current price. The first one is in the 1386 area and it is only visible on the 4-hour chart. This is an extension short setup having first target at 1351 and second target at 1332. Should price react at the 1386 level there is a serious possibility for it to break the 1332 level which would invalidate the 1358 support area and, almost certainly, decree a test of the 1130 area.

A second area of resistance is located in the 1398 area, up to the 1406 level. If price gets to this area and starts moving lower again before exceeding 1406 we could see the first target at 1347 be touched before a sensible reaction takes place, but prices could keep moving lower into the 1320 area, thus again below 1332, with the same implications indicated before. On the other hand, should price climb above the 1406 area the sequence of measured moves lower on the daily chart would be interrupted and we could see a resumed move higher, as some analysts are expecting. In this case we would put aside the 808 points scenario.

This would not mean that we could not see lower prices into the 1358 or even 1347 level but, eventually, price would turn up and the S&P500 could print new highs in 2013. Therefore two scenarios are still in place and they are:

1) S&P500 e-mini keeps moving lower, breaks the 1330 area and reaches the 1130, from there it bounces or continues lower into the 600 area.

2) S&P500 e-mini climbs above 1406, then prints a higher low at 1384 or a lower low in the 1347-1358 area and resumes the move higher printing new highs in 2013

Likewise in the Euro forex cross, at this moment we need to have patience and let S&P500 price show the way. Tomorrow I will send a Trading Plan for the S&P500 (see an example here for the Euro) in my mid-week update, thus enabling Newsletter subscribers to participate or at least be informed about the the next move in the stock indices.

If you want to have access to trading plans and watch weekly video reviews as soon as possible, as well as, receive special mid-week assessments (like the one I have send out on November the 7th and I am going to publish later on the Blog), plans and setups for the Euro-Dollar cross (before they happen), please subscribe my newsletter. It’s free and you get additional content, market commentaries, setups, e-books, articles on HFT and program trading, learning material and video-analysis that I don’t make available on my blog.

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If you intend using this information for your trading please do your own diligence, find the advice of a trading professional and trade at your own responsibility. The information provided is for educational purpose only. Please read the Disclaimer and accept all the risks. Thank you.

Have a good day

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Filed under English language, Euro FX analysis and trade setups videos

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