Wednesday, May 25, 2005

Eurodollar Boxes

I'd like to update the box situation in the December 2005 Eurodollar futures.

The daily bar chart above shows the bear market boxes in the Eurodollar futures. They are each 48 ticks from top to bottom. I want to point out an interesting feature of these boxes which is relevant to longer term box analysis in futures contracts.

The boxes you see were originally defined in the December 2003 contract by the initial drop from the bull market top at 99.09 on June 16, 2003 to the low at 98.61 on August 1, 2003. The December 2003 contract was the active contract at the time which is why we used it to define boxes. To calculate boxes for all subsequent contracts we used this box size and position defined by this initial drop in the December 2003 contract.

The March 2005 low occurred at the 3/4 point (95.61) of the eighth box down from the 99.09 top. The subsequent rally stalled at the top of the seventh box down. But the reaction from the top of that box has held several times at the 1/2 point of the box at 95.97. I think this market will make a stab at the 1/4 point (96.33) of the sixth box down before the bear market resumes.

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