In our report last weekend, we wrote: "If we get continued strength on Monday, our more sensitive internal indicator the Micro1 is likely to go to a buy setting up a fresh composite signal buy. And if this happens, we should be getting into another long entry next week. Big picture, internals are not supportive of a sustained advance so I am not expecting much on the upside before we get another sell setup ... Short term, it looks like we have some upside into the lower 3200s ... and there a decision is likely to be made on what next."
What actually happened: Whipsaw week. Wide range between 3220 and 3120 on the Emini S&P 500 (ES) before ending the week near the highs.
What's next for this week?
Internals are on the bullish side. Options are more or less neutral. Price action is rangebound/balancing on the very short term, but looks bullish on the medium term, consolidating before a possible breakout. With our short-term indicators back on buys and the composite signal long, we are also long. Let’s continue to give the bulls the benefit of the doubt as long as this is the case.
On price, a pullback down to 3180/75 area looks like a decent possibility to me in the beginning of the coming week, and if this area is held we should be able to stage a breakout above 3230s next. A direct breakout is also possible but based on how we closed on Friday, it looks like we may have some testing of support before that happens. A successful test of support and a breakout over 3230 area should get us up to the 3300 area next.
ES Grey Zone areas: The grey zones on the ES 5 min chart below are what I draw in on a discretionary basis. They are support and resistance areas which the market is most likely to react from.
Grey zone resistance at 3222-33 and then at 3249-59. Support is at 3192-82, 3153-3141 and then at 3120-3108.
For Monday, daily pivot is at 3211. Resistance R1 is at 3228 and R2 at 3242. Support S1 is at 3197 and S2 at 3181.
All the best to your trading week ahead.