Thursday, May 27, 2010
A bullish picture
Here is a 30 minute bar chart showing day session e-mini trading since the April 26 top. I think this chart presents us with a bullish picture. Here's why.
Note that the low at 1037 on Tuesday occurred at the bottom of a trend channel. I might also note that 1041 was the midpoint between the 866 low in July 2009 and the 1216 top on April 26. Since that low the market has produced two consecutive higher trading areas (last two blue ovals). This broke the string low steadily lower trading areas that had developed during the drop from 1216. More significantly, the last of these trading areas (the one developing today) is entirely above the steeper declining red trend line I have drawn. This is added confirmation that the pace of the drop has changed, presumably the early warning of a new swing upward. A similar inference can be drawn from the fact that the market today has spent most of its time trading above yesterday's high.
I think the ES is in the process of breaking out above the upper boundary of the past week's trading range (dash green line). The first part of the breakout swing is likely to carry to the top of the green trend channel near 1110. A reaction down to 1090, the breakout level, would be normal then. A more significant reaction will probably develop once the ES reaches the confluence of the declining red trend line and the rising green line (green oval).
I think a very big move upward is about to start. It should carry the ES to 1300 by the end of the summer.