Thursday, February 25, 2010

Breakout or shakeout?

I am still long one unit and am sitting here scratching my head. I can't figure out whether the move below 1090.25 on this morning's economic numbers is a breakout (implying a move to 1075-76) or a shakeout (implying that this morning's low will hold).

The trend channels I have drawn on the lower chart ( 30 minute bars, 24 hour trading) and the upper chart (1 point box, 5 box reversal) still show room to the downside before the lower channel line is hit. This suggests we are seeing a breakout.

On the other hand, we have seen three pieces of bearish economic news this week which produced an immediate bearish market response (red arrows). But in each case once the initial selling was out of the way the market essentially traded sideways to up. This suggests we are seeing a shakeout.

I am not going to add to my position since I think that 1075 is stronger support than 1086 because it is the midpoint of the rally from 1040 to 1112 and also sits on a pair of channel lines (see upper chart). If the market struggles upward the rest of the day but can't move above the horizontal green line on the lower chart I will get out of my other unit expecting to repurchase both units near 1076.


Teich said...

Very nice analysis.

The number of NYSE adv - dec issues has been gradually improving throughout the session. Some of the leading stocks like AAPL, MSFT have remained well above their lows of the day.

However, because of the "damage" done today, I am not sure if the market will manage to rise above Carl's green line at approx. ES 1096 right away.

Carl Futia said...

I just accidentally deleted a comment containing a chart link. Feel free to repost it!

Nick said...


Thanks, here it is. The bottom of the wedge is at about 1075.

The MACD, Stochastic, and RSI have all started pointing down again as the range continues to tighten.


Joe said...

Dear Mr Futia!

I clearly understand your frustrations.
In this situation, it is extremely diffcult to make the good decision.

However, as I wrote to your a couple of time, I have the best tool to support decision like this.

I just ran my index predictors, and currently it say the following:

Tomorrowm, Friday will not be as week as Thursday, it might even move up a litle bit from early morning levels, but the opening level might be negative, due to international impact.

The system generated clear Bear predictions for all major indices for early next week.

So highly probably that you would be able to get Your long back again from lover price levels
during the next 5 - 6 days.

You can see and learn to use the system, which is currently free for all interested traders:

To access the system after free registration go to:

Have a great week ahead.

Joe Papczun
Inventor of the technology behind

Dave Narby said...

This is the beginning of a move to around 1020.

Maybe lower. 912 would be a 50% retrace of this *BEAR MARKET RALLY*.

I expect there to be a few counter trend rallies before the next IT bottom.