Wednesday, March 17, 2010

Updated range estimate

During the past month the e-minis have rallied 80 points. Yet the market has been very quiet during this rally. Volume has been moderate and pit session volatility has been low.

I find this remarkable market behavior. Today, for instance, the ES is trading at new bull market highs. Volume has been very moderate and the market has traded in a five point range over the past two and a half hours. One thing I have learned over the years is that short term tops of any importance generally occur when trading activity is relatively high and intraday volatility is relatively high. Advances generally end with a bang, not a whimper.

So I have to conclude that the 20-30 point reaction I have been looking for is not here yet. Instead I think the ES will reach 1175 before any significant break of more than 10 points develops.

I am revising today's range estimate to 1157-1170.


Tim Mack said...

Buy a creeper sell a leaper

Denali92 said...

It is quad opex week, so anything can happen, but it is interesting to note that today's price action so far is VERY similar to Dec 16th's. We are also very OB on an hourly basis - the same thing occurred in December.

We then got a 23pt pullback that looked like it had potential for ugliness, but you pretty much nailed the range that day and the low stuck until the January sell off.

Just a thought on what might happen.

PortlockTrader said...

Thanks for the post Carl. How do you arrive at the 1175 target?

Market Karma said...

Carl,, I agree with your comment on tops ending with a bang as opposed to a whimper BUT I think this view needs to be placed in the proper context. I find it very common to see market tops take place with a "relative whimper" so to speak. In other words, the price action during the few days just before THE top may appear to be busy but relative to the price action during the weeks/months preceding, it is a whimper. For example, the action during July - Aug 2007 was incredibly volatile across all asset classes with some assets exhibiting their wildest single days in years. But by Oct 4, 2007 the SP500 action had truly quieted down to a whimper (relative to what was experienced the previous three months). And then THE top took place a few trading days after Oct 4, 2007. So did the Oct 2007 top take place with a whimper or a bang as you saw it? From this perspective I have described, major tops do indeed happen with a "relative whimper" and there are countless examples of this. Indeed, the condition of the global markets right now is ripe. -MK

Ali said...

This market is high on drugs..

The more it goes up without small corrections, the bigger the final correction will be.