E-Mini: Consolidation Structure Near Completion
We are now past the best performing 2 weeks of the year (first 2 weeks of July). Its been a tough two weeks for shorts, with there being a lot of shake outs and long demand candles. The price action looks very similar to what we saw initially in January/February. We saw an aggressive decline, reactionary bounce, a temporary consolidation, and then a further decline. I think we have a lot of upcoming earnings (that could tilt to the downside) that could take us there. We already saw some bank earnings and while for the most part they are mixed-the message is clear - banks, the drivers of credit, are getting defensive, canceling buy backs and preparing for losses from the loans on their books.
Regarding the technical trading, we saw the stopping action on heavy volume, a reactionary bounce (in both structures), a little bit of consolidation followed by the sell off. The big item that would solidify this sell off is a big bearish engulfing candle - I've noticed that has been a defining feature precipitating a significant move down not just in that structure but all short term consolidations. With what I would argue, mixed eco data behind us, high inflation figures (bad) but a surviving consumer (good) the markets have been digesting this data and hasn't decided its bad enough to move either way. I'm not sure what exactly will be the next catalyst down but most likely it will be interest rate driven or commodity based (like a spike and rebound in oil from the bear market it is in).
I am in the camp of hedging shedding long assets, adding to hedges for what you don't want to sell and adding to shorts as we head down.
Regarding the technical trading, we saw the stopping action on heavy volume, a reactionary bounce (in both structures), a little bit of consolidation followed by the sell off. The big item that would solidify this sell off is a big bearish engulfing candle - I've noticed that has been a defining feature precipitating a significant move down not just in that structure but all short term consolidations. With what I would argue, mixed eco data behind us, high inflation figures (bad) but a surviving consumer (good) the markets have been digesting this data and hasn't decided its bad enough to move either way. I'm not sure what exactly will be the next catalyst down but most likely it will be interest rate driven or commodity based (like a spike and rebound in oil from the bear market it is in).
I am in the camp of hedging shedding long assets, adding to hedges for what you don't want to sell and adding to shorts as we head down.
