Wednesday, May 26, 2010

Terminal shakeout

Here is a five point box, three box reversal chart showing 24 hour e-mini trading since the April 26 top at 1216.

I think the rally from yesterday's low at 1037 is sending a very bullish message. It is the bullish half of a classic terminal shakeout. Friday and Monday the market spent most of its time trading in a 1070-1090 range (first part of blue rectangle). Then late Monday and early Tuesday the market put in an uncorrected break below that trading range and below the previous lows at 1051 and 1056 (red arrow). But then, after only a little sideways action yesterday morning, the ES took off in an uncorrected rally (green arrow) that carried all the way to the top of the previous two days' trading ranges.

This sort of action says that the market thinks prices below 1050 are too low. The implication is that a substantial rally lies ahead. A point and figure count across the base area offers a target at the old high, 1215. And I think this will be only part of a bigger rally that will carry to 1300.


EricH said...

I think your call is early, just as you missed the bottom yesterday.

ES having a lot of trouble taking out 1088. We can easily see 1060 sometime tomorrow.

Edwin said...

A back-test to 1,060 for one more (final) shake-out and we are off the race to 1,300.

Adsense said...

Hi carl
i have not studdied point and figure charts at all but what im guessing your saying is the time of the sideways movement is equal
to the distance ? once you get the break out ?? todays sideways action to me is taking about the same time as yesterdays sideways action . this pattern looks to be formaing some sort of triangle which i woul dexpect a break out to the upside . im not sure weather we get the same point move as the reaction off themay 6 lows
but if we did the 1150 area would
be expected into monday. weather that happens or not remains to be seen yet the bullish message you speak of i think is correct .
i do think we will see some sort of reaction down though with june 6th 7th as some sort of reactionary low . from there we will see how this market goes direction wise
i still favor an early aug peak

tempo said...

Thanks for the great charts and estimates. They are always very objective and useful.

The painter who paints said...

I didn't know you were a wyckoff follower as well.

Kishore said...

This is the first rally from the "bottom". First rallies hardly ever succeed. The least that can be expected is at least more move down. The subsequent move up, unless the move down is more powerful than the previous move up, can be expected to be more powerful.

Kishore said...

Carl, your painting the far out scenarios of 1300 is not conducive to day trading. Your point is well taken but is interferes with the current short-term view of the market, unless one is going to buy and go away for a few months, without any stop loss orders.

I hope you don't call me a jerk for pointing this out and you don't take this as criticism. I am your long-term admirer!

pimaCanyon said...

well, Kishore, some folks like to trade in the direction of the longer term trend, so overall market direction is certainly useful to day trading for those folks.

Naveedah said...

Kishore,you sound wise but the estimates of today were 1065--1096.
Clear possibility to the downside to
1065 as well.
How bullish things turn,straight to 1300 is any way not a chance.Thanks.
As usual,I can't go without thanking Carl for your chart and unbelievably useful blog.
Wish you the best!

Naveedah said...

1065...London time 20:29
Target met!
Both possibilities were give to us by Dr.Carl Futia


EricH said...

That was it.
Went long ES at 1065.25.

Jack said...

These last few trading days in May (IMHO) may be the most important ones because it will set the tone for the next several months.

I think with the failed rally this afternoon is Not a good bullish signal for the market. Couldn't hold the gains. May test support once again.

See if we hold there


Edwin said...

The 60 minute chart says we are vulnerable to go lower for another 10 points or so a nice a reversed H&S to play out.

John said...

Today's market action continues the bear market action. Lowest close of the entire move down today.

Aneo Designs said...

Dow closes below 10k. Isn't it bearish?


Rajeev Bharol said...

A Rally is coming but if it is sharp and huge, it would be a sign of a bear market.

Naveedah said...

Jack,Edwin,John,AneoDesigns and myself...
How we got so bearish and ES_F is 1082.50again.
Here Carl's support keeps us in control.

EricH said...

I just sold at 1089 for +23 points.
Hitting resistance here. Should come back to 1080s again before taking off.

Atrader said...

On May 25 I mentioned the low at 1036.75 was it. The calc is on that post. simple math.

The first 50 on the daily has hit and been blown away (1092.25..1147.75+1036.75).

Then next 50 is 1105.75 ( 1174.75+1036.75).

The one after is 1126.75 ( 1216.75+1036.75).

1053 on the daily close holds this up.

Key: 1134/1135 is first target on the 1053 daily close line.

Key numbers on daily closes:
Above 1097.25 implies 1122 is the primary target...1122/1126.75/1134.

Other numbers on this up move are 1105/1107/1113/1118 more for daytrading purposes.

Key numbers up and down from Daily closes:

1053/1057.25, 1097.25, 1122.00. Above 1122 on the daily close we get to 1169.25 as resistance. 1169.25/1176.75/1202/1207.75

There probably will be a test of the 1083/1082 level but the daily close will be much higher.

1126.25 line in the sand. 1148-1122key range.