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TECHNICAL ANALYSIS


Flag Day?

09/27/11 09:54:08 AM
by Austin Passamonte

Here's the midterm outlook for the Standard & Poor's 500 index.

Security:   S&P 500 futures
Position:   N/A

The US stock index markets are said to have entered bear market territory after having fallen from recent peak highs to recent swing lows. But that movement has not been in a straight line or even in a deliberate trend.

FIGURE 1: ES, WEEKLY
Graphic provided by: NinjaTrader.
 
The past seven straight calendar weeks for the S&P 500 futures have held inside a very crisp, very distinct sideways range. Highs around 1220 and lows around 1110 have defined the 100-point or so sideways range in this time. What the whole world sees now is a textbook bear flag pattern in the midst of confirmation. See Figure 1.

FIGURE 2: ES, WEEKLY
Graphic provided by: NinjaTrader.
 
Basic technical analysis includes measured movement from breakout or breakdown points to consolidation patterns that project equal distance onward when continuation ensues. In this case, the S&P 500 futures moved from +/-1360 highs to 1160 midpoint of the bear flag consolidation. A measured projection from that range down through this pending continuation pattern confirmed would target the ES 960 range. See Figure 2.

FIGURE 3: ES, WEEKLY
Graphic provided by: NinjaTrader.
 
Added to that viewpoint is a second technical measurement where the current high-low-lower high, 1-2-3 swing measures a Fibonacci projection scale that shows 100% value likewise near the 960 level. Two completely different technical analysis price-action studies reach the same mathematical conclusion.

The longer-term view suggests a continuation break lower from this seven-week sideways consolidation should materialize near its 960 area before seeking a new direction from there. Lower price objectives in the 800s and lower are also part of this scale. Unless the S&P 500 musters strength to break above the 1220s highs and base there for support, it is likely to continue lower.



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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