Friday, August 14, 2009

Supply shock

Here is a 60 minute bar chart covering e-mini day session trading since the 865 low in early July. Much to my surprise a supply shock developed during the first hour this morning. It can be recognized by the unusually wide range of the first hour bar and the unusually high volume during that hour (blue arrows and blue dash oval).

I think the sellers are now in control of this market. My best guess for today's low is now 990 and I doubt that any rally the rest of the day will carry much above the 1000 level. Looking a little further ahead I see support at 980, the dash green line. The midpoint between the September 2008 top at 1291 and the March 2009 low at 666 stands at 979. You can also see several minor tops and bottoms which have formed at the 980 level.

I have no reason to think this is anything other than a normal reaction within the up trend from 865. My guess is that we shall see the e-minis trade near 980 sometime next week, and then the market will start a rally to 1035. By the end of October I expect to see the e-minis near 1120.

6 comments:

Robin said...

do you add short etfs?

RAW said...

Thanks Carl. I am beginning to follow "with your eye"... most educational, essential "trader development" IMHO

Hades said...

Can you comment on the Shanghai composite ? It's been the leader for the world bullish turn-around , but it appears to be faltering just a bit now

Enky Nakamura said...

it recovered enough in the close to let me think it is not a supply shock, what do you think Carl?

Win said...

Carl,
I think the action today suggests a possible lower high next week, rather than a higher low as you suggest.

Also look at the behavior of one of the bull market leaders, AAPL -- perhaps my favorite indicator of the market. Do you really think that AAPL will make new highs? The market is very stretched.

Hades,
In my view, both the SSE and the BSE are very stretched and ripe for a 2-3 month correction. The BSE recently touched 16,000 double its March lows.

Dave Narby said...

While new highs are possible, IMO at this juncture lower highs and lower lows are far more probable.

We might not test new lows within the next few weeks, but that's a possibility.

...Not to mention the possibility of an X sigma down day.

Eventually, I expect a new low to be put in sometime around or after Christmas.