Long Term Outlook — ES, NQ, E6
The SP is getting down to the long term target of 1242.00, after breaking from our long term swing point at 1369.50. The area of 1257.00 to 1231.75 has a host of big reasons why the market should hold this area and start a rally that takes them back to new highs for the year and not holding these levels will be a very bad sign for the longer term trend as it will turn negative after 2 closes below 1242.00. First we will go over all the of the levels below that should stop the current break, starting with 1257.00, this is the 1×1 angle from the 3/6/09 low of 665.75, the 200 day average is at 1251.00 and the 1242.00 level is the 1×1 angle coming up from the 7/6/10 low of 1002.75, it is also a major Square of 9, Gann level and the last level of 1231.75 is a 38% retracement from the 1373.50 high and the 1002.75 low. This is a very broad range to watch for a turn, but getting down to any or all of these levels and then taking out the swing point for the day will be a sign that a major turn is starting. Remember with the 1×1 angles that you want to see them get through them by 5 and even 15 handles and then close back above the angle to confirm the signal. So, the perfect scenario would be that they trade below the 1242.00 1×1, maybe as low as the 38% retracement at 1231.75 and then close on the high for the day back above the 1×1. As always we will be guiding you through this process as it evolves with our short term market outlook. As stated above the target on the upside as long as these levels hold will be new highs for the year. The other view of this market is that 2 closes below the last 1×1 angle at 1242.00 will turn the long term outlook to very negative and the downside targets will be 1179.00 and then 1103.00, this is a 38% retracement from the 1373.50 high down to the 665.75 low. The 1103.00 is a long way away and the most important thing to watch will be the swing points above each day to look for a sign of a earlier turn back up.
The NASDAQ has had 1 close below their 1×1 angle at 2233.00 and on Monday it must stay and close below it to confirm the negative view, as long as they do the targets will be 2149.00 and then the next 1×1 angle at 1945.00. Because of the situation in the SP still having to close below 1242.00 to confirm it has turned negative and that the NASDAQ has to have a second close below its 1×1 you will have to watch the NASDAQ down at the 2×1 angle at 2190.00. Trading down to this level or below because it is an angle and then takes out the swing point on the day and closes back above the 2233.00 1×1 will be a very positive sign. On a close back above the 2233.00 1×1 the upside target will be the same as the SP, new highs for the year.
The Euro has come off from the 1×1 angle at 1.4650 from the 1.4925 high on 5/4/11, the high was 1.4695 in the June contract, we are now trading September and the downside target to start will be 1.4202 and then the 1×1 below at 1.4110. Aside from the 1×1 angles, not making a new high on the run up to test the 1.4925 high is a negative sign and the target because of this is 1.3755. It will take a close above the 1.4650 1×1 angle to turn the market very positive and this should lead to a rally that takes them back to their all-time high of 1.5986.