Thursday, May 12, 2011
reaction is nearly over
Here is an hourly bar chart showing ES trading going back to the March low at 1241.
From the Bin Laden high of 1373.50 the market has dropped 47 points so far. I think it is going a little lower, say to 1310 or so (green oval). That level is support for two reasons. First, at 1310 the length of the second down leg would equal the length of the first one (blue dash rectangles). Secondly, if the market maintains the pace of the decline it will reach 1310 right at the lower boundary of the trend channel I have drawn.
There is perhaps a one in three chance that the lower channel line of the green trend channel will hold instead and that the low of the correction has already been seen. We'll know if this is the case within the next day or two. A rally from today's low of 1328.75 that carries through tomorrow would convince me that the correction is already complete.
In either case I think the market is preparing for a move up above the 1400 level. This bull market is far from over.