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TECHNICAL ANALYSIS


Broken Arrow

03/15/11 08:16:56 AM
by Austin Passamonte

Take a look at the midterm price direction for the Russell 2000 index and futures contract markets.

Security:   TF
Position:   N/A

The Fed-induced magic carpet ride for stock index markets since September 2010 was led by hot money flowing into the Russell 2000 small-cap index (TF). That is usually the proxy market leader in both directions, up and down alike. See Figures 1 and 2.

FIGURE 1: RUSSELL 2000 FUTURES INDEX, DAILY
Graphic provided by: NinjaTrader.
 
The 810 to 815 zone is critical, especially for the gap-fill and continuation upward if this cycle is just a pullback before the uptrend resumes. It would take a close above 825 on a daily-chart basis to take out short-trade stops currently clustered there to push sellers off the pile.

Unlike the Standard & Poor's 500, which followed Thursday's (second to last candle) session with Friday's (last candle visible) bullish engulfing pattern, the TF held its close beneath the middle of the prior session range. That does not show any type of visible strength at all; it is actually a measure of weakness.

FIGURE 2: RUSSELL 2000 FUTURES INDEX, DAILY
Graphic provided by: NinjaTrader.
 
Open gaps below from August 31, 2010, all the way higher are so numerous, it takes a second chart to plot each one. From a current rest close of 799+ on the June contract back to sub-600 at the lowest gap marks each price magnet waypoint below. Most if not all of these gaps will get filled eventually, whether that takes days, weeks, months, or years.

"Sell in May and go away" is a stock market axiom much older than any of us in today's marketplace. It might just be that late spring has sprung early this year, with geopolitical and natural disaster news pressing world markets from all sides. A resumption of the next POMO plan might be the proverbial camel straw or lifeline to stock index markets. Only time will tell.



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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