Tuesday, October 27, 2009

Update

Here is an hourly bar chart showing day session e-mini trading. The market has traded sideways for most of the day. An early break below yesterday's low on the consumer confidence number was quickly reversed. This makes me think that the e-minis will rally a little more and probably match the size of the early rally on Monday (purple rectangles).

By the end of the week I think the market will have dropped into the 1045-50 target zone highlighted by the green oval. The 1050 level would make this break the same size as the average of the past three reaction since the early July low at 866. The target are is also at the confluence of two trend lines you see on this chart.

Thus far I have no reason to think the drop from 1099 in the e-minis is anything but a normal correction within an ongoing up trend. If I am right about this then I think the market will soon begin a rally that will take it to 1120.

10 comments:

jeff said...

Carl,

I agree with your thoughts. However, if we break below 1045 on the emini's, undoubtedly, the landscape would have changed. I don't intend to be first out of the bunker; instead, I will wait for confirmation of a bounce before going back long.

The bottom of the trendline since March is SPX 1052(as of today's close) and is rising roughly 3 points per day. Know this fact and your market thoughts make going long a very low risk trade as I can easily define my risk in case I'm wrong.

Happy trading.

alejandromagana said...

What will happen if the market brakes under your estimate, what will be the next support.

andi said...

last multiple breskdown from 20 SMA bounced back within ~10 pts..if we repeat the pattern, we have a good buy here @1055 area..50 SMA not far away either...however keep an eye on how market bounces against 20 SMA and 1075..it will show if market rally has petered out...

F&H Painting said...

I expect Carl is targeting 1120 because that is a 50% retracement. However, if the market drops below 1150, he will have to rethink his strategy and move targets downward.

Wags94596 said...

The market once again successfully tests 1061 intra-day and the FXE (Euro) has bounced a touch off of the 50% retracement of the rally off the Oct. 1st lows.

I would not be pressing the short side here.

:)

Kishore said...

On the daily charts, we rebounded from the trend line; did not break it. Stochastics, even on the daily charts, is showing oversold. Lower time frames are showing positive divergences on indicators and there is bull flag formation on the 800-Range Range Chart. We have tested an important support level at 1057 and the next lower support is far away at 1046. Therefore, it is quite possible that the correction is over. But then, anything is possible in this market!

PM said...

Hi Carl,

On 10/18/2009 10:36:00 AM I posted to your blog.

I said:

"If you look at a daily continuation chart of the SP futures front month over the last few years, a downtrend line can be drawn from the two highest points; the first is the high set on 10/10/07 at 1586.50 and the second high set on 5/19/08 at 1442.00... to be very precise, I created a downtrend line mathematically to eliminate any guess work or manual errors...

There are 144.50 points from the first high to the second high... including weekdays when the markets are closed, there are 153 days between these two highs...

If I divide the price difference between both highs by the number of market days, I arrive at a downtrend line which moves lower at the rate of .944444 points each market day..."

Of course, the very next day the market rallied very strongly and I recanted on my downdline. But now, it appears that this long term down trend line has taken over and has stopped the rally cold in its tracks. I think the rally may well be over for some time and we could readily see a healthy 10% correction before the market can rally again and clear that overhead hurdle.

Thanks.

Kindest regards,

PM

jeff said...

PM -

Thanks for your analysis. However, I only trade what is in front of me and enables me to define risk in case the trend changes. That said, I'm expecting the expected(as is Carl) by this ~50 point decline from the highs. Until this same chart format changes, the trend is up. And when it changes, I will adapt and cut ropes to my position.

andi said...

market bounce ahead: tomorrow..EEM the leader is back at the support level from few weeks back..folks, watch this bounce carefully for if the bounce is weak and stalls within 15 pts, lots of kaching can be made on the downside...

MaverickUK said...

I also think we will rally tomorrow and I have a 1072.5 target for the S&P futures. Exactly as Car;s target. The fact that we did not hit target today (1055) which was also my target - could also imply an impending rally/