Monday, July 13, 2009

The next few days

Here is a 60 minute bar chart showing the last two months of e-mini day session trading.

The market has bounced off of support at 867. I think it is headed for the 965-80 zone. But I also think that there will be reactions along the way. I am trying to guess where the first reaction of 20 points or so is likely to start.

The drop from the June top was contained by a very clear trend channel (red dotted lines). A rally back to the top of the channel would now be the obvious expectation. What interests me is that right near the top of the channel there are three other resistance levels. The first is midpoint resistance at 906 (purple dotted line) based on the big rally on the way down to the 865 low. That rally was about 44 points in length and a rally of the same size would carry the market to 909 (purple rectangles). Finally, the midpoint of the entire reaction is at about the 910 level (red line). If the current rally keeps up its pace (rising green line) it should reach the 905-10 zone in a couple of days (green oval). From there a reaction of 15-20 points to a higher low would be a normal expectation. Should the market blow right past that concentrated resistance it would be an indication of great underlying strength.

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