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TECHNICAL ANALYSIS


Filling Voids

10/03/11 09:18:47 AM
by Austin Passamonte

Here's the midterm outlook for S&P 500 index (futures).

Security:   S&P 500
Position:   N/A

US stock index futures have just completed their eighth consecutive week of trading inside a clearly defined, crisp, and resolute flag consolidation pattern. Price action is nearing a resolution of the break from inside to points beyond from there.

FIGURE 1: ES, DAILY
Graphic provided by: NinjaTrader.
 
But first, a quick look at the daily chart picture dating back to late summer = early autumn 2010 (Figure 1). A little over a year ago, stock index markets sold off to the ES 900+ levels where they hit rock bottom on July 5. From there it was a volatile stagger upward until a higher-low bounce from August 31 through the subsequent rally to new recent highs above ES 1350.

In the process of that rally, S&P futures left behind no fewer than four unfilled open gaps. We said at the time, soon after the fact and repeatedly since then, that eventually those gaps will be filled. "Eventually" appears to be a date in your near-term calendar.

FIGURE 2: ES, WEEKLY
Graphic provided by: NinjaTrader.
 
Weekly chart perspective (Figure 2) shows a few interesting developments. Price continues to fail at upside tests of the two-month range. Last week there was an inside bar where the highs and lows were contained inside the prior week's overall range. Market technicians will be anxious to trade breakouts above or breakouts below last week's extreme zones.

Two weeks ago, Standard & Poor's 500 futures posted an outside bar, eclipsing the prior week's high and low range. One week later, price action contracted to an inside bar range. Unless something substantial shocks stock markets from current weakness, those downside gaps will be revisited and filled.



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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