Friday, January 22, 2010

E-mini Overview - Where Are We Headed?

Where are we now and where are we headed?

Weekly chart - Sky blue channel down. Top bear market TL was broken in early November. The (pink) P2 (bull market) wedge off of the March lows has played out almost to the very end and the most significant break of the lower support line is happening now. the indicators on this chart show just how overbought the minis are and how close we are to a trend change in the market.

Daily chart -Here you see the pink P2 wedge and the 50% to 61.8% retracement zone (gray box from 1127 to 1235) much better. The convergence of the upper TL, the 50% retracement and the end of the wedge all combine to make a powerful reversal point (esp when combined with the overbought conditions)  New to this chart are the recent divergences to price in the daily indicators (yellow lines). These have a high degree of accuracy in predicting turns.

Daily drill down - Same chart as above covering the C leg of the ABC P2 corrective. Here the new lower green support line is introduced. I believe this is the target for this move. Second target is the backtest of the bear market top TL. The big question will be does it fail at that point or will the bull market continue from there? I do not think it will, but the possibility has to be mentioned. The fibs for this fall off of the "B" 865 low in July are - 38% 1039, 50% - 1006 and 61.8% - 973.

60m chart - Here you get to see the structure of the top better. One thing to notice here is the volume dramatically increasing. I see a possible channel forming (dark blue) that may hold the first wave down of P3 or the final corrective down of P2. The minis did not set a higher high like SPX on Tuesday the 19th. Not sure if this is significant or not. The low of 1101 looks like it completed a 5 wave structure. The removal of the 1127 and 1112 supports and marking new lows was pretty convincing a trend change may be upon us.

30m - Off of the 1148 top it is hard to grasp a count. I would suspect this is a 3 ending here and we had a long 2. I like the channel (sky blue) and what appears to be a falling wedge ending in an oversold situation. the only thing that detracts from those two formations are the devastated support points. If she stops here 1121 is both the wedge target and the 61% fib for a possible retracement.

Support points from here- 1084, 1068, 1028, 1013, 976, 948, 925, 878 and 865.
Fibs - for this fall off of the "B" 865 low in July are - 38% 1039, 50% - 1006 and 61.8% - 973.
Fibs - for this fall off of the P1 665 low in March are - 38% 963, 50% - 906 and 61.8% - 850.
I do not see any diagonal support lines that may come into play at this time.

Shanky's targets? I think this move possibly makes the lower green TL near 1085 in the first week of February. At that point we either bounce back to new highs or it completes 2 of 1 of 3. How severe does this fall get? Maybe the possible "bow tie" top rolls on over at a controlled pace till August when it really lets go. Two possible options I see for a bear market top TL (sky blue) backtest are 1013 in late Feb or 948 in late may. I believe the backtest of that TL will mark the end of 1 of 3. It just seems logical at this point. I don't have a crystal ball, but those intersections look good. If anything they may be too steep (or not steep enough). We'll know more as this form develops. One thing for sure is that after 865, there is a big dark hole to the last bottom.One other prediction - EWT will do a much better job on the way down than it did on the way up. I'll be counting again!

GL and have a great weekend.