Monday, June 22, 2009

Supply shock ?

Here is an hourly chart of the September e-mini day sessions. We saw a marginal supply shock this morning - marginal because volume was relatively high but not "shockingly" high. In any case there is a clear rejection of prices above the 910 level visible on the chart.

The implication is that the market is headed down to its next support level which is at the level of the May reaction lows (red dashed line), roughly 870 (not 880 as I said in this morning's guesstimate). A drop from Friday's high which carries the e-minis down as much as did the first down leg would end just about at 870 (purple rectangles).

I think the 870 level is the drop-dead level for the upmove from the March lows. Weakness below 870 would mean that the market is probably headed down to 800 or so. However, I do not think a significant break below 870 is likely on this down move.

1 comment:

John M said...

Hi, Carl. An alternate view of the chart action: today's move is part of the final wave of the first leg down, stopping around 870, to be followed by a rally of possibly a couple days, then the second leg down. In this scenario, 870 would likely be broken in early July before we start to move up again.

Regardless, the important thing right now is that your 870 target seems to be dead on. Thanks for that. I'm short and was tempted to bail earlier this morning but just had a hunch. You're analysis cemented my decision to stay short, which has been profitable. I likely would have missed a chunk of this move if not for you.

Thanks again.