Monday, May 24, 2010
Here is a five point box, three box reversal chart showing 24 hour trading in the e-minis. I am treating the activity on May 6 that occurred below the 1100 level as a "mistake" (black dash oval). This puts the low of the first leg down from 1216 at 1091 and makes that swing 125 points in length. The second leg down started from 1174 and so far has been 123 points in length. At its 1051 low last Friday the ES also kissed the lower parallel trend line drawn from the intervening 1091 low. These two facts are preliminary evidence that a low has either already occurred or will soon develop.
Another important observation is that the sideways length of the recent trading range (lower blue line) is greater than that associated with the trading range at the 1174 top (upper blue line). Usually this means that the swing down from 1174 has ended or will soon do so.
I am going to stick with my view that the low is not yet in place and will develop in the 1030-40 range (green oval). But I will change my mind about this if I see strength above the 1100 level. Such strength would break the steeper red down trend line I have drawn and would also take the market above the high of the last reaction on the way down to the 1051 low (green dash line).
In either event I think the next significant move from current levels will be upward and will eventually take the ES to 1300.