Wednesday, May 26, 2010
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.