Here are some of my views referred to the general market as represented by the S&P500 Index & ES E-mini Futures Contract.
On a longer term basis, the timing model using the EMA20 on a monthly basis has showed a trend change over the last 2 weeks following a strong 20% rally in just 18 trading days (SPX 1075 to 1293),: However, during the the past 11 trading days, the SPX has been consolidating between 1215 and 1287.
It is important to note that I´m favouring an end of year rally, although the stance is based more on fundamental/experience/gut feeling than techhinal analysis, strictly. However, it is also important to stress out that, personally, I´ll be watching what price action is telling me. I rather make $$ than being right.
On a longer timeframe, the last week has provided a change of trend, swithcing to long, as noted from the chart below, last week´s candle closed above the monthly 20EMA.
The daily view, shows than the S&P500, represented by SPY, has breached the resistance levels of 122 & 124 and currently sits in the pivot point of 126,as marked in red. That is my line in the sand. A clear break out of the trendline and the 1261 level would favor the bull case, with 1291 (already tagged before) and 1313, finally. Conversely, 1220 & 1240 are currently working as support. a clean break below 1220, would further strenght the bear case.
An alternate view of the S&P500 futures, with the help of some prop indicators I use, shows some caution. It is important to note, that this is even a shorter view. Each Renko bar represents 3 ticks (0.75 points) while the chart bewlow represents the cumulative delta.
What is keeping cautios to the long side are the invenotry levels I´m watching. The chartbasically represents the short and long commitment over a period of 3 weeks.
We can see that tradesr which got short above the current levels, back in late October/early November are still mainiting their short positions. Furthermore, the two closest levels that short positions have been initiated are 1250 & 1275, and these shorts are still holding their positions too, since October 9th, regardless of the upmove.This is noted by the negative divergence shown in the chart. Furthermore, in the event those two levels of short inventory are breached (it is important to stress out that they could be breached, eventually, thus crating fuel for even more upside), the bulls will still need to face some short commitment from late Octovber/early Novemeber, at the top of the ES around 1290. That would we the line in the sand for me.
Although the market can rally further, there are still short inventory commited to their positions at different levles. This doesn´t neccesarilly means that those shorts can bail-out of their positions, which can happen anytime, ingniting a rally, but what -as noted before- makes me to be cautios of having a complete upward bias. Since this is shown in real time, I´ll be watching these levels during tomorrow´s session and will update the levels of inventory and price action, tomorrow night, in order to track the evolution of the index.
If you are interested in learning about the mothodology I use in ES/S&P500 futures analysis, you can contact me via twitter @demianpack.