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ES Support and Resistance for August 8


Today's levels.


My long-term indicator is the result of a lot of reading and verifying models presented by various authors. In the final version, I decided that I could track a limited set of variables to tell me when the markets are likely to rise and when the are likely to fall. I track the changes in the prime rate (reasoning that I only need to track one interest rate and so many other interest rates are based on the prime rate), installment debt (since people are not likely to go into debt if their personal situation doesn't look too good), and the change in stock prices. I then combine those. Over the last few years, the interest rate indicator and installment debt indicator have both been neutral. The prime interest rate is not changing so that one is a natural neutral. Consumer debt has been rising over the last year. It is not rising at a fast enough rate to turn that part of the indicator positive. With the other two parts neutral, my signals have essentially swung with the rise and fall of the markets. I look forward when the other two parts also move away from neutral.

The E-mini S&P 500 Futures Contract (ES) opened higher and above R1. It paused briefly at R2 before heading higher. (We had a narrow range on Monday, only 6.25 points to it didn't surprise me that the levels offered little resistance.) The ES broke through 1400 before pulling back to R2. It bounced off R2 and began moving higher again. I was anticipating hitting R3 because of the limited range used to calculate the values. It would still be a rare event but much easier to attain with a narrow range used in the calculations. The ES approached R3 but then retreated. It made it all the way back to R2 before halting the slide. Just before the close, R2 yielded and the ES moved below it. We ended up with a very narrow range of only 7.75 points. The values are very close together.

The levels for today are:

R3 = 1414

R2 = 1406.25

R1 = 1401.75

Pivot = 1398.5

S1 = 1394

S2 = 1390.75

S3 = 1383

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