Friday, July 02, 2010


Here is a point and figure chart covering the same period of trading in the September e-minis as the bar chart I discussed yesterday. This chart is a five point box, one box reversal chart of 24 hour activity in the e-mini.

One reason I like point and figure charts is that they can offer subtle clues about shifts in the balance of power between buyers and sellers. Generally speaking, sellers are in control when the chart shows more extensive sideways areas at the top of rallies than it does at the bottom of breaks. Buyers are in control when the sideways trading areas at the bottom of breaks are wider that those at the tops of rallies.

On this chart I have used red dash ovals to highlight the trading areas that developed while the sellers controlled the market. There was little sideways movement at lows but quite a bit of it at highs. But in June the situation has gradually changed. The market started to show more extensive trading areas near lows than near highs (green dash ovals).

In particular the trading range that has developed yesterday and today is growing by the hour and is already almost as big as the one that developed near the June 8 low and will soon be bigger than the one near the June 21 top. Moreover it is developing right at the lower trend channel line defined by the flash crash low and the May 25 low.

This is one more piece of evidence that buyers are assuming control of this market and that an extensive rally lies dead ahead.


Nav said...

Amazingly Great Work!
Every blog brings something new to learn.I followed you 100%so my work is close to yours where i differ,there
I explain to you for the sake of learning and stop trading.
Have great weekend with your loved ones!
Thank You!

volcanik said...

Carl, great chart there. I agree with you on the short term outlook of an ensuing rally. It should take us to the 1080-1100 area. However once this rea is hit, we should resume a harder path downwards.

sandy allred said...

Today appears to be the best buying opportunity since April 26. Have to agree about the extensive rally (through November) is likely to begin Tuesday.

Adsense said...

Hi Carl
we are now entering the short term cycle low window . it is from july 2nd-12th qand right now i cant narrow it down anymore then that because im not home to look at computer, indicators ect.
you mentioned several weeks ago near may 20th sometime the possible 3 peaks pattern and said you would go into in the future yet still have not mentioned it , been very long time since you mentioned lindsey , why is that ?
come on dude give in and go for something longer term the a day
thanks you

Laurence said...

How do people really expect the market to rally into an unprecedented financial storm over the next six months? Cash incentives to boost housing and the consumer have ended. Which in itself provided a floor for the economy and the stock market over the last year. Almost every housing health indicator over the last month is indicating a fall off the cliff. No abatement in job losses or bank failures. We are heading into a period like '08, except this time it will be worse because the gov't will be unable to come to the rescue because they are broke.

TAE said...

Thanks for sharing the pearls of wisdom especially with regard to the point and figure chart here.

Have a great 4th of July weekend.

E said...

Whether markets are going up or down, your range estimates for the day are priceless.

Step by step is good enough for me.

Thanks for another great call.

Best wishes for a relaxing Holiday.

raven said...

I am currently in the Bull camp but not for long. It looks like we will see a pop to 1065.

I hate to get long in this market because it simply smells like a statist prop job.

My secrect is that the planet Uranus a trend changer is going retrograde before the open next week. Had the markets closed up on friday I would of kept my tripple X shorts. But now it looks like we get a little pop up before we go to Prectorville at the end of this month.

q said...

Mr. Prechter is in the Sunday NY Times today forecasting a crash that will take the Dow Jones well below 1,000, the worst in 300 years!