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TECHNICAL ANALYSIS


Potholes Season

03/14/11 09:17:44 AM
by Austin Passamonte

Here's the midterm outlook for the S&P 500 index price direction.

Security:   S&P 500
Position:   N/A

Springtime in the US means an end to winter, a beginning to spring, and a return to the cycle of life of life renewed. Here in the Northeast it also means a time of road damage repair, with winter potholes patched and filled. Springtime 2011 for stock index markets may see some patching up in similar fashion before summer driving season arrives.

FIGURE 1: June 2011 S&P 500 FUTURES
Graphic provided by: NinjaTrader.
 
The June 2011 ES contract shows where price ended its parabolic ascent on waning volume in late February and recently completed a lower-high failure that formed a very crisp textbook wedge formation (Figure 1). Price has since broke down from that classic pattern and then staged an outside session aka a bullish engulfing candle to end the week.

A retest of the 1310-1315 apex area of that formation, which fails and turns lower, would be bearish confirmed. A break below most recent lows (as of Friday, March 11, 2011) would be equally bearish. A break back above the 1320s and especially the 1330s would resume the rally following this pullback sequence.

Should price continue lower as presumed until upside breakout proves otherwise, there is a multitude of open gaps below from the "Swiss cheese" rally fed by the POMO-driven liquidity push. Some, most, or all of those gaps will be filled eventually. Sooner or later, price will retrace and backfill lower levels from here.

We'll track this chart and target those gaps as potential profit exits for short trades taken on confirmed sell signal entries to come.



Austin Passamonte

Austin is a private trader who trades emini stock index futures intraday. He currently trades various futures markets from home in addition to managing a trader's educational forum

Title: Individual Trader
Company: CoiledMarkets.com
Address: PO Box 633
Naples, NY 14512
Website: coiledmarkets.com/blog
E-mail address: austinp44@yahoo.com

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Date: 03/15/11Rank: 2Comment: 
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