Monday, February 22, 2010

Here is a point and figure chart showing 24 hour trading in the e-minis. On this chart one box represents a one point move and a five point move is required to reverse a swing.

One simple way to identify a change in trend direction is to watch for a move past the terminal point of the last reaction prior to the potential terminal point of a trend. On this chart the lower green line is drawn at the high of the last reaction within the down swing from 1101 to 1040. Once it was broken to the upside I concluded that that particular swing was complete. Since the activity within the lowest blue box suggested strong support (terminal shake out accompanied by substantial sideways activity) I thought it was a good bet that this minor trend change indication would also lead to a similar signal showing the reversal of the entire drop from 1148. Such a signal did subsequently occur when the higher green line was broken to the upside.

The last reaction on the way up from 1040 ended at 1093 after the Fed raised the discount rate. As long as that 1093 low holds (red line) the move up from 1040 is in good shape. The succession of higher boxes (blue rectangles) just makes the trend direction obvious.

This market is headed for 1200.


jeff said...


You spelled out pretty well and defined your risk(in case you're wrong)with a break below 1093.

I sense you won't opine, but the S&P and oil continue to be married at the hip during the up and downtrends. With your call for S&P 1200 and oil to $50, your divergence views on these two trading mediums don't fit the very obvious trading patterns the rest of us are seeing.

RBharol said...

I like your confidence Carl.

dcatlowpj said...

A very clear/concise write-up, Carl. Thanks.