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TECHNICAL ANALYSIS


Broken Neck

04/29/11 12:37:16 PM
by Austin Passamonte

Here's the near-term view of the S&P 500 futures market.

Security:   ES
Position:   N/A

Stock index markets have bounced sharply from each sudden pullback for the past two years since historical lows went in place. Fueled solely by the Federal Reserve's quantitative easing (QE) and QEII programs (POMO) for the relentless overnight gaps and relentless drifts upward, price is once again at a crossroads of action zone now.

FIGURE 1: ES, DAILY
Graphic provided by: NinjaTrader.
 
Clearly visible on any longer-term chart are distinct head & shoulders patterns for stock index markets. The S&P 500 shows left & right shoulders in place, crown of head near 1240 and neckline of resistance near 1330 - 1340, depending on which form of measurement one uses.

Pattern lows from 1240 to a high near 1340 give a 100-point measurement of width. That projects upwards from the neckline a similar distance, giving the general ES 1440 zone credence to traders who value head & shoulders patterns. See Figure 2.

FIGURE 2: ES, WEEKLY
Graphic provided by: NinjaTrader.
 
Stretching that same view out to a weekly chart, we can see where ascending pennant formation brings a trendline resistance into play somewhat above the current resting price. That would be the next zone of congestion higher to mark. Likewise, it will take a break and close below the neckline near 1330 lows to negate this progression and turn it into a failed pattern sell signal instead.

Price action basing at or above 1330 to 1340 zone is bullish. A break & close that bases below 1330 zone is bearish. Pretty clear lines in the sand to work around from there.



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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