Wednesday, April 14, 2010


"Relentless" is a good title for the market movie we have watched during the past 10 weeks. The ES has rallied 170 points (16%) without even a single break of as much as 30 points. It is worth comparing this performance with the rallies off of the March 6, 2009 bear market low and off the July 8, 2009 intermediate swing low.

In the former case the ES rallied 134 points (20%) before its first 30 point break set in. In the latter case the ES rallied 150 points (17%) before its first 30 point break. It is also worth noting that the rally off of the March 2009 low eventually carried the ES up 291 points (44%) before its 90 point, June-July 2009 drop. The move up from the July 2009 low carried 282 points (33%) before the drop of 108 points in January-February 2010.

From these observations I draw two conclusions.

First, the market is about due for a break of 30 points or more. It is up 160 points from its February 5 low, more points than either of the two previous upswings put in before their first 30 point breaks. Creative numerology suggests the progression 130 - 150- 170. The ES is also up 16% from its February 5 low without a 30 point break as compared with 20% and 17% for the preceding two swings.

Second, the move up from the February 5 low has a fair amount further to go. Engaging again in creative numerology, we may well see the the pattern 44% - 33% - 22% of percentage gains. A 22% advance off of the February 5 low would carry the ES to 1270. A 280 point advance would carry to 1320.

I think the odds are good that the ES will break 30 points or more from resistance in the 1210-15 zone. The 1214 and 1213 levels (red solid line) are the midpoints respectively of September 2008 rally from 1137 to 1291 and of the drop from the 2007 high at 1587 to the October 2008 low at 837. The July 2008 low which followed the Fannie Mae, Freddie Mac rescues was 1200 (red dash line). I think the 1200 level has yet to make itself felt as resistance and when it does so the market can easily break 30 points or more. Note that the September 2008 low was 1137 and the ES rallied 10 points higher before it broke more than 100 points this past January. A similar performance would have the ES rally to 1210 before the 1200 resistance makes itself felt.


Jack said...

Retail investor did NOT participate. Totally manipulated rally thanks to 33 Liberty St in NYC

Urban said...

Thanks Carl, as always. It seems logical and I'm with you. My one cause for pause is that this market appears to defy logic.

Ted said...

Nice analysis, I appreciate all the reasoning and thinking you share with us.

andi said...

carl is one of the few bloggers who has been right lot more than he'e been right...i would recommend folks to follow him and not to get lost in noise from other bloggers. Carl has done a fabulous job...

John said...

There's no doubt that we could rally to much higher levels. But I personally don't see the rally -- without correction -- getting to 1270 or higher.

Last year, the market was recovering from a severely oversold condition. Now it's suffering from a slightly overbought condition and less likely to keep screaming higher before some profit taking.

pimaCanyon said...

GREAT analysis, Carl. Not only helpful to those of us trading the markets, but it's most helpful from a learning perspective, seeing HOW you do this kind of analysis. Many thanks!

mfm9800 said...

You are one of the rare few who have consistently called this market. You certainly have the ability to filter all the noise and refine it into profit. Bravo!

Wags94596 said...

Nice job Carl!

Teich said...

The last reaction from ES 1199 during the overnight session brought ES down 15 points to 1185. Similar recent reactions took place at ES 1165, at 1176, and at 1188.

I think the ES 1210 level should likewise trigger a 15 to 20 point drop.

fiona said...

Skepticism is the first stage after negativity - just ask Carl - then we have embracing the market, then euphoria.
A long ways to go.
As for the retail investor - he was so gobsmacked by his losses, he has not yet dipped his toes.
He needed longer than usual for the market to show it was just not going to tank again. Thus the low volume.
(Commentators talking about how much stocks are up from the low does not help either to the retail investor's fragile mind.).
Thanks Carl for all you do, especially on down days.

Cris said...

Would a default from Greece affect your analysis Carl?

Thanks, Cris