Friday, July 14, 2006


Here is an hourly bar chart showing regular hours trading in the September S&P e-mini futures. I last commented on this market here.

This morning the market dropped 5 points below projected support at 1240 and I now think a rally has started. I think this rally will assume a classic, three phase shape. It should carry at least to 1251 at which level it will be 16 points in extent and equal to the size of two previous rallies within the drop from 1290. If the 1251 level is surpassed then the next stopping point would be 1265. A move as far as 1265 would open up the possibility that this morning's low will hold and that a move above the 1300 level has begun.

I would like to point out that the S&P futures have had a nearly 50 point range this week. The last time we saw this big a range was during the first week of October in 2005. The market dropped about 15 points lower the following week and then began a 150 point rally.

Over the years I have learned that unusually wide daily or weekly ranges typically occur on "breakout" moves. On the other hand, if a wide range day or week develops within a well defined trading range (as has this week's range) it typically signals trend exhaustion and an imminent reversal of day's or week's direction. This is what I am expecting to happen now in the S&P's. Moreover, I am still confident that we shall see the S&P at 1350 or higher later this year.

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