Thursday, June 03, 2010
Here is a 10 point box, one box reversal chart showing 24 hour e-mini trading since the low in February 2010. The important thing to notice is that the trading area which has developed near last week's 1036.75 low is wider than the one which appeared at the start of the decline in April (dashed blue ovals). This means that the technical position of the market is potentially strong enough to reverse the drop from April's 1216 top.
There are two point and figure counts which allow us to estimate the potential of any rally from current levels. The more conservative one counts across the recent base area and shows a rally potential to 1220. The more optimistic one counts across the entire base beginning with the May 6 low at 1056. It shows rally potential to 1380. The latter number is not as outlandish as it may sound today. There have been three sustained up trends within the current bull market thus far, up trends which ended at 957 in June 2009, at 1148 in January 2010, and at 1216 in April 2010. These three trends carried the S&P up an average of 31%. A 31% gain from the 1037 low of May 25 would put the ES at 1358.
The start of a move to 1300 and higher will be confirmed by a penetration of the declining red trend line which currently stands near 1125.