Tuesday, April 27, 2010
Supply shock ????
Here is a 30 minute bar chart showing day session e-mini trading over the past month. S&P downgraded the debt of Greece and Portugal this morning and this news triggered a high volume, selling avalanche (last red oval). There are two reasons why I believe this action is more likely to mark the end of a corrective phase than the beginning of one.
First, and less important, is the fact that volume, while high, was not as high as the volume on last week's news that the SEC was suing Goldman Sachs (first red oval). Secondly, and more important, is the fact that today's high volume is developing in the middle of a trading box (blue rectangle), not outside the box. I expect the low of the reaction which started from yesterday's 1216.75 high to occur somewhere in the green oval, i.e. in the 1175-85 range. I think we shall see this low within the next day or two.
Once this reaction is complete I expect the ES to resume its rally to 1270 and higher.