Wednesday, September 01, 2010

Breakout


Here is a five point box, one box reversal chart showing 24 hour trading in the e-minis. I think today's action is an upside breakout from a base formed during the past week (last green dash oval). A count across this base yields an upside target of 1140. The significance of this target is that it is above the last high at 1127. This suggests that the market has made a higher low above the early July low and will soon make a higher high above the early August high.

One clue about market direction that can be gleaned from a point and figure chart comes from looking at the relative sizes of congestion areas that form near highs and lows. On the way down from the 1127 high in early August you can see that the congestion areas near highs became smaller (last three red dash ovals) while those near lows became larger (last three green dash ovals). This shows that the buyers were gradually assuming control of the market.

Notice finally that the most recent congestion (green arrow) was bigger than the one which formed at the early August top (red arrow). This is often a definitive indication of an imminent reversal in trend.

7 comments:

Jack said...

Hey Carl.

I noticed the same thing myself yesterday, posted at twitpic: http://twitpic.com/2jz0zx

Only difference is I use a 0.5% box on a 1box reversal. Same logic though, big base building exercise leading to today's breakout.

Cheers

Naveedah said...

Got the answer today,why Dr.Carl doesn't go short very often.Short squeeze is more "aee aee" than long trap!
voila to the blog!
Gracias.

Danny said...

One more difference is you posted it yesterday and Carl posted it this morning.

roguewave said...

dozed off...bored..then noticed..aug 98 dn then sept rev up..fast forward...6 years...aug 2004 dn then sept rev up...fast forward...6 years...aug 2010 dn...then sept?...maybe everyone frontrunnin all that almanac data crunched and thrown about how we always crash in Fall...one for the Wizards of the future to work on anyway..ZZZZZ

Edwin said...

If we hit 1140, the bearish H&S, and airship omen would yield to your inverted H&S with a target of roughly 1,250.

Naveedah said...

Good Morning!

So far, September is off to a good start, with a gain of 3% in the S&P 500 and seemingly bucking history.

When August is down, September is only slightly less bad, falling 0.6% on average and gaining 50% of the time.
The 3% gain on Wednesday is likely a hint of the Beta rally we could see this Fall as economic clarity returns. Cyclicals have consistently outperformed on “risk-on” days, gaining 100bp on Wednesday.

YOU SAVED otherwise I was forcing all lines down to 1010 :)My trading account is w/girls learning from you.safe!

ThankYou!

All good..all good said...

Hi Carl,
Thanks for always teaching and sharing your work.
KD