Thursday, November 03, 2011

headed higher after holding support

Here is a daily chart of the December e-minis going back to late June. Last week I think the market staged a genuine upside breakout from its August-October trading range. The breakout levels are depicted by green dash lines on the chart. You can see that Tuesday's break dropped the ES right into that support zone but no further.

This looks like a successful test of the breakout level. If so the next leg up should eventually equal the size of the first leg which was 221 points (blue dash rectangles). This gives an upside target of 1429 (blue arrow).

Looking back at the past three months I think the most striking fact is that the market only went sideways from August to October despite repeated bouts of bad news about the evolving European debt crisis. This is bullish behavior, at least in retrospect. It looks like the market is telling us that the Europeans will successfully "muddle through" the current crisis without crashing the EU monetary and banking system, at least not this time around.
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7 comments:

  1. Anonymous11/03/2011 12:35:00 PM

    Excellent analysis!! Wow! 1400's!! I use the 14 EMA crossing the 40 ema to signal major market turns. That occurred on Oct. 24. I concur--we go up!!

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  2. Win11/03/2011 12:50:00 PM

    Carl,

    I am now looking for a retest of support (downside limited to 1185 ES or so by Nov 9) and then a launch to 1330 by EOY. That should be the top of Wave B of this correction that started in April. Wave C should take us down to 1010-1050 next March. That is how I am currently playing it.

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  3. Nav11/03/2011 01:30:00 PM

    That said sentiment remains on the cautious side w/most people pretty
    concerned, esp. re Europe. The pain trade still seems to be to the upside.

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  4. janet11/03/2011 01:47:00 PM

    Thanks Carl for the update...the monkey in the wrench would be if a right shoulder forms on the possible head and shoulders pattern.

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  5. tapped out11/03/2011 03:14:00 PM

    freddie! I see a cross earler in the month but not on the 24th. What's the time frame you're using?

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  6. Nav11/03/2011 03:40:00 PM

    A biz-generalist sent,found interesting :
    "Traders are in full “headline
    watching” mode and trying to anticipate some kind of resolution. There seems to be an
    effort to paint the world w/a “glass half full” brush, based on Bernanke (his hints of an MBS
    QE3 Wed)".

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  7. Anonymous11/04/2011 11:14:00 AM

    TAPPED OUT--

    You're right! A week earlier---I had it confused with a stock i was looking at.

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