Friday, May 12, 2006


Here is a 5 minute bar chart showing regular hours trading in the June S&P e-mini futures. I last commented on this chart yesterday.

I thought we would see a low around 1306 because at that level the drop from 1331 would have equalled the the preceeding reaction from 1324 to 1300. But no support materialized there so we have to look at previous reactions within the move up from the October 2005 low at 1172 to get some idea of where this reaction might stop.

In April the next biggest reaction dropped the S&P futures about 37 points from 1324 to 1286.50. The biggest reaction withink the entire uptrend from 1172 started from a top in 1301 early in January and ended near 1255 in February, a drop of 46 points.

A 37 point drop from 1331 would drop the market to 1294 while a 46 point drop would end near the low around 1286. At the moment I would have to prefer the 1286 taret because as yet I don't see a three stage correction from 1331 visible on the daily bar chart. So I would guess that the first phase would end near 1294, the second phase rally would bring the market back into the 1310-20 zone and the third phase would end near 1286.

As you can see on the chart above the pattern of lower lows and lower highs has yet to be broken. When it is we will have a sign that the second phase rally has begun.