Week ahead

This week will be very interesting for traders. Talk in many financial publications over the weekend of increased probability of recession will leave many traders on the sidelines waiting to see what the Federal Reserve will do next week and how the Fed is perceiving the current economic conditions. Unemployment rate hit a two year high last week and most like myself think that the mortgage downturn will lead to more deterioration of the labor market and economy itself.
This week there are a few important numbers to look at, to see if the market can find some short term support and initiate some short covering. First number on my radar is the the 1396 number on the ES as minor support if we do break that 1400 level. Below that we can easily drift or capitulate towards 1375/1378 area. Please note i am not currently looking at my charts so these numbers aren't exact but rounded points of interests.

Oil should be in play this week as I think we are heading into the important spring change over of heavy to light sweet crude. Light sweet crude is much more refined and has a higher value because of this. Seasonality should play out in this commodity market and Oil should in a few weeks head higher as we move closer into the high driving season for the United States. Where does Oil go? best guess is that is challenges that $100 level and this time will have a better chance to breach it. I have been saying oil should touch $100 since 2003 and was ridiculed by fellow traders. Gold seem also to be setting up bull flags on each pullback and shows no signs presently of making any dramatic pullback without some outside influence such as strength in the US dollar or real slowdown of Global markets.

Monday look out for the first hour highs and lows and play the market accordingly. The first hour break should set the tone for the day but no mistake we could chop around till earnings season start or the Fed meeting next week. I still believe with the oversold conditions here we can bounce but market sentiment needs to be respected.