One Ideal Setup

December 10, 2002
Don Miller

It’s been a slow morning trade
thus far in the index futures markets as
we once again find ourselves in pre-FOMC trading mode which, even though no news
is expected, usually results in a tight trade.Â Early short-term trading
opportunities have thus far been limited to modest ES or NQ gains, triggered by
holds or breaks of our three minute guide, yet limited by the hourly downtrend
tailwind to the north and diverging oscillator momentum to the south.

As we approach midday, both markets are approaching hourly downtrend support
which may be worth a short trade should your lesser timeframe trigger, keeping
in mind that trade potential will initially be limited by current 13-minute
uptrends. Additionally, one will want to keep an eye on any price/momentum
divergences to the south if we do retrace, especially in light of
longer-term supports and oversold momentum.Â

And speaking of longer term, I’ve dusted off the cobwebs on the weekly and
monthly charts below, which show both markets testing weekly support (also the
daily 50MA) in the context of monthly downtrends.Â With everyone and his/her
brother and sister eyeing the 880-890 area on the S&Ps as support (we show it
via the weekly 15MA and lower daily Bollinger Bands; others including Kevin
Haggerty also show Fibonacci retracements), there’s certainly a premise to look
for low-risk lesser timeframe triggers for positioning.

At this end, one ideal setup would be a reversal to long on the hourly,
coinciding with a bullish cup with a right rim in the 910-915 zone.Â Such a setup
would then provide an entry premise using new hourly support to the south as the
handle base premise for both entry and stop.Â And while I’m at it, Santa, how
about another Patriots “run-the tables” stretch into January?

ES (S&P)Â Â Â Â Â TuesdayÂ
December 10, 2002Â 11:15 A.M. ETÂ Â Â Â Â Â NQ
(Nasdaq)