Here is a daily bar chart of the March 2012 ES going back to the October 4, 2011 low.As I have explained in previous posts there is strong resistance near 1375 for two reasons. First, the 2011 high on May 2 of that year was 1373.50 (red dash line). Second, a rally from the November 25, 2011 low which matched the size of the October 2011 rally would have ended at 1366 (large blue dash rectangles).
Today's price action looks like a downside breakout from a small trading range which had formed during the past two weeks. I think it means that the ES is headed for the dash green trendline. A more precise estimate of the upcoming break is the size of the drop in early December which was about 71 points. That gives a downside target of 1306 (small blue dash rectangles).
I think this is only a normal correction in an ongoing bull market. There is still the possibility that the ES is forming the top of a domed house (see this post) but if so it still should rally above its recent 1377 top before the top is complete. A more bullish prospect is that there is no ongoing 3 peaks and a domed house formation and that instead the market is headed for its 2007 top at 1587.
I dont' think the top is here yet. Commodities are still lagging. Probably somewhere around point 16 then a sideways market.
ReplyDeleteThree downside support targets at 1333/1323/
ReplyDelete1313: 1333 is the Jan 26 range high (& 1337 Feb 10
low), 1323 is the Oct 2007 monthly downtrendline & Dec upchannel breakdown obj, and 1313 is
the Oct-Nov daily uptrendline/a 65 point drop equal to
Dec 7-19 decline/Nov 38% retrace (Elliott 4th wave).
"A more bullish prospect is that there is no ongoing 3 peaks and a domed house formation and that instead the market is headed for its 2007 top at 1587"
ReplyDeletewow. where did THAT come from?
The problem is: many people await a 1300-1310 zone will be a terminal support. Too many?
ReplyDeleteFor me it was a first, natural thought to seek a support there too(you know, square of 9 at 1306, 38% retracement of last leg up, etc.).
But when I saw many people prognose the same, I'm not as sure as I was a few days before.
I don't like to run in too big and crowded herd :-)
S+P 500 Sentiment gauges:
ReplyDelete1)Daily Sentiment Index (DSI) (Mar 6): 63% bulls,
(69% 5 day avg, 70% 10 day avg). Semi-overbought.
Likely peaking short term, after the 17% bulls 10 day
avg oversold extreme in late-Dec.Tops have been above
85% bulls over the last three years.
2)Investors Intelligence readings (Mar 6): 47.9% bulls
(vs 51.1%), 26.6% bears (vs 25.5%), 25.5% correction.
A slight plus. Down again from from 54.8% bulls
reading on Feb 14, which was the highest since May 2
‘11. Last year’s high was 57.3% on Apr 5.Historical
danger zone is 56-62% bulls.