Monday, January 04, 2010
Here is an hourly bar chart of day session e-mini trading. Trading activity is subdued today but is much greater than it has been over the past two holiday weeks.
This morning I thought that the break that started last week from an overnight print of 1128.50 would continue after a brief rally to 1122. Instead the ES blew right past 1122, the level at which the rally from Thursday's late low would have equaled the length of the preceding rally. Moreover, Thursday's low was at the dotted green support line defined by the preceding short term high.
This price action means that the reaction from 1128.50 is over and that a breakout to new high ground is in progress. My upside target for the next week or so is the green oval, a tad above the 1140 level and at the confluence of the upper channel line and the estimated top of a trading box (solid blue rectangles). These boxes have a price range of 16 points or so.
Over the years I have observed that markets are often erratic during the first few trading days of a new year. With this in mind I suspect that we won't head straight for the target near 1143. Instead I expect the market to fluctuate in the box outlined by the dotted blue lines. The bottom of the box is at midpoint support near 1118 (purple dotted line) while the top of the dotted blue box is near 1133.
I continue to expect a bullish January and February. I think the ES will reach the 1170 level before there is any danger of a substantial reaction.