Friday, October 23, 2009
Here is a 30 minute bar chart showing day session e-mini trading. The market has dropped decisively below yesterday's midpoint at 1081.50. From this I conclude that a lower top was established this morning and that the reaction which started from the 1099 level has further to go.
The purple rectangle delimits a reaction which matches the average length of the three previous corrections in the e-minis since the early July low at 866. Thus my downside target of 1050. I think this entire drop will continue well into next week. There should be one or two up days along the way.
The next temporary low (green oval) will probably occur against one of the two declining red dash trend lines. I note that the 1064 level is also the midpoint between the October 2008 low of 837 and the high of September 2008 at 1291 (higher purple dotted line).
By the time this correction ends I expect the market to kiss the rising green trend line which should then have reached the 1050 area. The 1054 level is the midpoint between the May 2008 high of 1442 and the March 2009 low at 666 (lower purple dotted line).
Once this drop ends I expect the e-minis to resume their advance and move up to 1120 or above.