S&P

Here is a compressed and updated hourly chart of pit trading in the September S&P futures going back to early July.

The first low you see on the chart was the low that occurred on July 7 right after the London terrorist attack. The news itself came very early in the morning New York time and in electronic trading the market dropped to 1167 (the first blue line on the chart). When pit trading started in Chicago that morning the market traded at 1186.50 and went up from there. The drop from the preceeding high at 1225.20 on June 17 to the July 7 low was 58 points.

I like to use precedents such as this one to get a handle on the likely terminal points of trends. In the current situation the market made another high at 1249.20 on July 29. Another drop of 58 points would carry to 1191. The low Sunday night after the hurricane news was 1194.20.

This gives me quite a bit of confidence that 1194 was the low of the current reaction.

The second factor which reinforces this deduction is that as an uptrend progresses low points occur at successively higher box levels. The July low occurred at the low point of the current box near 1180. So it makes sense to expect that the current reaction would end at the next higher box level, i.e. the 1/2 point of the current box near 1202.