Time And Price Decisions

In Friday's session, we noticed that the bond had pulled back into a healthy confluence of four Fibonacci price relationships between 100 03/32 and 100 07/32. This "price cluster" zone included a retracement of one prior swing, along with three 100% price projections of prior swings down that were obvious on our analysis of a 60-minute chart. (The definition of a price cluster is the coincidence of at least three key price relationships coming together within a relatively tight range.) This became an important "price decision" in this contract. If the bullish symmetry was going to remain intact, this key zone was a likely place for the decline seen in Friday's session to terminate. Note that this method can be used on any time frame.

So what was the decision? As long as price held above this key zone, we had reason to consider the buy side in this contract. The risk was defined just below this key price support zone.

What happened? The low made in Friday's session at 100 07/32 (directly within this key zone) remained intact, and was followed by a healthy rally in Monday's session. What now? Consider this recent low made at 100 07/32 a key low. If it continues to hold, we can look towards 101 02/32, 101 09/32 and even 102 05/32 on the upside. If 100 07/32 is violated instead, it suggests a much deeper downside correction back to the November 8 low at a minimum, and possibly more on the downside. Always remember to use a stop and trail it just in case a contract falls short of, or fails to meet our expectations for a particular setup.

Now on to the current action. 

The January soybean contract (SF1 | Quote | Chart | News | PowerRating) has rallied nicely in recent sessions. The question now becomes, when might this rally terminate or at least stall?

We are now looking at some natural resistance to the recent rally in this contract. Price projections from all the relevant swing highs and lows in this contract show us a strong coincidence of price relationships coming in between 494 3/4 and 499 1/4 and then at 501 3/4 and 503 1/4. These two zones represent key decisions in the Jan. beans. A test and failure to get through either of these zones, gets us to consider exiting any current long positions and also to consider some sales with the risk defined just above the top of the "cluster zone." A sustained move above these same key areas suggests a continued rally towards 512 and 513 3/4 instead.

What's up in the Nasdaq 100 futures contract (NDZ0 | Quote | Chart | News | PowerRating)? Not much in the way of "up" you may say. We are currently watching this contract continue to decline from a key price zone defined on the daily chart between the 3153 and 3180 area (recent high made at 3155). Now we have to begin to calculate where and when this decline might terminate.

We can look at this from two angles. First there is the "angle" you are most familiar with which is price. As far as price is concerned, basis the futures contract we are looking at the 2695-2712 area as a key downside decision.

The second "angle" is time. As far as timing is concerned, we are looking at a healthy coincidence of time relationships between November 20-November 23 and then another time window around December 13-December 15. Ideally, we would like to see key price support met into one of these standout time zones, followed by price reversal activity. If this occurs, it would define a pivotal low from where we could once again really consider the buy side in this tech-related futures index. Until then the current price pattern suggests lower prices. We will keep you posted if this scenario for a low begins to play out.

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