Monday, December 07, 2009


Here is a 60 minute bar chart of e-mini day session trading. As you can see the market has been trading sideways for nearly three weeks. Its trading ranges during that time (blue dashed ovals) have shown no real trend. After Friday's employment number was released the e-minis rallied nearly 20 points and then two hours later had dropped 25 points. In my experience such a bearish u-turn in response to good news normally implies that the market's' trend has turned downward.

As in all matters of market action interpretation it is vitally important to compare what actually happens to what normally happens. It is in this comparison that the most valuable information about the supply-demand balance will be found. In the present case it would have been normal for the e-minis to close Friday in the lower part of their range and to continue lower from today's open. But this is not what happened. Instead the market closed Friday above the midpoint of its Friday range (1107) and today has spent a good part of the day session trading above that level (purple dotted line). This fact, coupled with the evident pattern of higher lows since November 27 makes me think that the e-minis are about to rally to the top of the trend channel I have drawn on this chart.


Kishore said...

Carl, most probabaly, most traders believe the Friday employment report to be fudged up numbers.

The excitment of a "better than expected" employment report is wearing off and the market will resume its normal behavior of an overbought market, i.e. a sell-off. The up trend on daily charts is not an overriding factor at this time as the market is in a trading range.

F&H Painting said...

look again maybe

jeff said...


I want to agree with you, but with the exception of some short-term indicators, the trend is down(for all of the reasons I've layed out over the past few days).

You don't discuss it, but the Russell 2000 again is getting rejected at the 50 DMA after making another small double-top. For the market to continue to advance, you need strong bredth in Small Caps, which isn't happening. AAPL is down, GS is down, AMZN is down...basically all of the strong leaders are down.

As such, I'm adding to my S&P short positions here with a stop just below today's intra-day high.

Teich said...

Hi Carl.

Looking at the ES 30-min chart for last Thursday and Friday, I see three tall (>300k contracts in 30 min) volume bars. Did all that selling mean nothing?

On the other hand, today's selling at 2:30 PM was not very bad; we had only 160k /ES contracts in 30 minutes.

Kishore said...

Carl, a BS Indicator should work well in this market.

With Bernanke’s speech today, the BS Indicator went off the scale. A great opportunity for a contrarian to go short!

PM said...

Hi Carl,

On November 10th I posted to you that the SP's have finally closed above their two year downtrend line. I believe the sideways action over the past 4 weeks is the correction, call it a rolling correction. If so, then this is extremely bullish. The line in the sand is the deadline, according to my model, which is December 16th. On December 16th we must close above 1135.20 in order for this rally to continue, otherwise we'll see that long awaited correction.


Kindest regards,


TradingNuggets said...

Or... Market going to stay range bound and grind sideways for the rest of the year.

probably most Money Managers locked in their gains for the year.

just my op.


extrader said...

Your chart is telling me that the S&P is forming an Ascending Wedge which normally concludes to the downside!

The Dow has also formed the pattern!

And also financials looking weak!