November 2nd week trading plan

Market  Commentary:

I wish i had posted this earlier on Sunday, for the benefit of futures traders of overnight session. By the time you will read this, you will already see ES dropped for europe open, and now it is around 1239, as i write this.  Not only we have some headlines that will create uneasiness among traders, the market has been overbought to end the october to remember.   Among the headlines that create uneasiness in me (and perhaps for short term traders around the world)  are the following:

• Greece has created a comma and continue, as opposed to the ending period that the world was expecting after the G20 meeting.  There is going to be a new government, and an election in greece, which creates the possibility of a default sooner than expected by markets.  So disorderly default is the very scenario that european  leaders are trying to avoid, since it creates the possibility of euro collapse, without a firewall around greece, and banks taking serious hit from the default.
• G20 has not done anything really, to create stability and assure global markets. China, as expected by me, is refusing to step up to the plate, and continues to extract juice out of the western nations, in the form of currency manipulation. US has its own debt to deal with and does not have the resources to help Europe. So, who is going to play ball ?  Lack of unity among world leaders is what i see, for now.
• France  and Italy are in the headlines as they create further austerity measures, to keep their bond markets stable; but this is going to affect their economic growth in 2012 and beyond.   Italy is already getting headline attention, as its CDS and bond yields climbed higher in recent weeks, and political instability becoming a possibility in italy, due to the austerity measures that are required.
• But not all is gloomy, since there are some positive things home front.  US companies are continuing to show the earnings, and fed stands ready to do further stimulus plans, if  things  worsen  in 2012.  So, the question is which dip should one buy ?

Technical  Analysis of ES:

I still standby  my bullish view of  1350 ES by  April, 2012 (as posted on oct. 30th).  But, for the short term, my analysis shows that market needs to work off the overbought conditions and  stabilize.  At  levels of 1250-60, i  was thinking that the downside risk is more than the upside potential;  My estimate is that  ES will see 1220 this week as high probability with a possibility to go lower.  At 1280 and above i will be a seller with swing trades for this week.  If i see 1190 area, i will be initiating long term buys, with due consideration given to news of that day.

The last blog posting forecast a test of the cyan line, creating a head and shoulder pattern, which did not happen, because the news changed within 5 hrs of posting that, and Greek PM withdrew his call for a "referendum vote", upon pressure from european leaders.  But, the probability is higher this week, for a test of that cyan line.   At the minimum, i am expecting a test of the  bottom green line, in my previous chart, and that area would be an area to watch carefully during intraday trades.  And i will be a seller at the top  yellow  line in the same chart.   As i finish writing this, ES is already at 1235, with a fast drop, and is near the top green line.