Well this week is the big week, the one we have been waiting for FOMC on Wednesday... yay can't wait!
A quick revist of last week's blog:
"Typically the week before FED we see a drop then a slow rise Monday Tuesday IE next week into it, so Thursday, Friday of this week we may be seeing some signs of bottoming out and maybe even into Monday am. So barring any news events I think we are seeing the start of a mean reversion down to 2912 on ES. That will catch out all the suckers who will be still waiting for 3100. The WP on ES this week is 2987. Levels below 62/56/50/42/27/12/ above 94/98/3000/04/14/23/33/43 "
Ok so that last 1 hour sell off on Friday 19th was just a fake and we didn't get the mean reversion in fact we went back an tested and created ATH ... Again the levels were perfect and provided some good trading opportunities. A very solid trading week with 264 ticks of profit in the end with Thursday and the ECB providing some nice volatility and may be a prelude of what is to come this Wednesday ?
What do i expect this week.
Well Monday and Tuesday probably not a lot. I expect sideways action. So let's discuss options for the FED as this is the main event.
1. No cut (unlikely) Very big downside action
2. 25 bps cut and jawboning bonanza - I expect big downside
3. 50 bps big move upside
Obviously I can't predict what the FED will do but I expect option 2. The question will be then is if the 25 bps are "priced in"? Where we are currently i.e. ATH's, seasonally (August to October) I am expecting a 3%-5% move downwards and this certainly could provide the catalyst. Now clearly I could be wrong and these markets could continue the insane push higher, so trying to game the FED isn't a wise idea. If you want to have some skin in the game you could buy a long straddle buy call/put at the same strike or a strangle (OTM buy call/put) and hope for the big move either way, I'd prefer the strangle to be honest on a weekly timeframe.
ES levels upside we have 3033/43/50/98/106 with 43-50 being huge resistance, downside we need to watch for 3020/11/04/3000/98/88/69/56/
The key on Wednesday is will we see if we have some form of a doji / reversal candle that could suggest we have hit a top. I would expect unless Wednesday provides an immediate sell off, it may also be a classic dud and then Thursday everyone trades the opposite direction! 3000 is your line in the sand.
Being right (!)
I hope you all enjoyed my daily analysis in such a way that I am right 100% of the time... to prove my point I will continue do this just so you can all see how easy this is and hopefully some of you may benefit from this.
As I mentioned before I will do a webinar next weekend. I will send out details in the week about timings and subjects to be discussed. It will either be on webinar or skype. All the best for the week ahead. TI