Wednesday, July 07, 2010

First leg up

Here is a five point box, one box reversal chart of 24 hour e-mini trading going back to mid-May.

As you can see the market established an extensive sideways range during the past week right at the bottom of a trend channel. A count across this range projects to 1095. A rally as big as the last rally (97 points) would carry the market to 1100 (blue rectangles). This 1095-1100 target area (green oval) will probably be at the upper channel line by the time it is reached.

I think the market has embarked on the first rally in a new bull market up leg. The previous one lasted 13 months and carried 550 points. A rally that carries upward 8 months and 340 points from the recent low would end in April of 2011 at the 1340 level. Another 13 month, 550 point rally would end in August 2011 at the 1550 level.


Hail said...

Not sure there is a good reason why another 550 point rally should follow a 550-point 1-yr rally.
According to this logic, why cant a -400 point 2-yr downtrend follow a -400 point 2-yr downtrend?

My own guesstimate is that we stay between 900 and 1200 for the next year.

PUG said...

Viva el Toro!

Adsense said...

Hi Carl
july 2 looks to have marked the cycle low which was between july 2
and july 12th . the next cycle high is now due between july 16th to aug 1. the focus being on the latter . the june 21 highs must not be broken if the longer term bearish cycles are in force .
tomorrow should be a down day
yet friday monday should turn the market back to the upside .
it is starting to get interesting .
i see why you have your bullish take and ill admit it is valid .
that said i think we have another decline coming which will take us to new lows for the year .
in the bigger picture keeping it simple , point 7 would be the june 21 highs ( i could be wrong ) point 8 is now into as late as early august . this would imply very difficult trading and not
a continuation or a new uptrend
but more of the same of up 1 day down the next and more sideways action .
good luck

q said...

This market is certainly at a testing point. Today's rally does feel and look like a first leg up of larger degree but I think further upside is needed to confirm it will keep on going. The SPY for example, is now testing the down gap that took place on Jun 29th and exists from price 107.50 to 106 on an hourly scale. Also, this gap took place with the heaviest hourly down volume since the May 20th down gap. It usually takes time to eat through the resistance created by these heavy volume down gaps. In fact, the May 20th down gap on very heavy volume was tested twice during the May 27th and Jun 3rd highs. Ultimately the May 20th gap repelled prices lower to test the May 25th lowest low to that point in time. Once this May 25th low successfully held with the Jun 8th low, prices were able to move up through the May 20th down gap. So lets see how prices do with the current important down gap now being tested. I will be more confident of seeing the SPY press higher through 107.50 (top of the gap) when the 10y bond yield gets back above 3% yield. There is a lot going on right now with many asset classes testing key resistance levels. I sold short today on the close simply because for daytrading, that is where I think the more attractive risk reward lies. But I would rather be trading this market from the long side through year end than the short side!