Wednesday, June 29, 2011


Here is my five point box, one box reversal chart of the e-minis covering the past four months.

The base surrounding the June 16 low is very extensive and is much bigger than the base associated with the March 2011 low. The March low supported a rally of 135 points. The current base projects a move to 1420 and the market generally exceeds this sort of target in a bull market.

During the past three days the ES rallied from 1257 to 1304. I think this is a breakout from the extensive base which has formed. The breakout price is 1293.75. It is normal for the market to hesitate for a few days after a breakout and drop to or a little below the breakout price during the period of hesitation.

Looking further ahead, I still think that all the action since the February top at 1342 is likely to take the form of a triangle pattern. To complete the pattern the ES should rally to 1342, then drop to 1300 or so. This last drop will be accompanied by warnings of a head-and-shoulders top by chart readers but I think it will only be the last corrective move in the triangle.

Once this triangle is complete the market should stage a very strong rally which will take it above 1400 and possibly to 1500.


George Rahal said...

Would a break below 1300 in the short term constitute a false breakout?

alexnewbee said...

and pigs will fly.

Esther said...


Very nicely done.

And you are right - if SPX pulls back from approximately 1340, the calls of "Head and shoulders top!" will be deafening.

Just as the consensus coming into last week was that the end of June and QEII spelled imminent disaster.

EVERYONE KNEW the market had to decline.

Well, almost everyone.

Thanks for the blog, Carl. It is much appreciated.