Tuesday 28 November 2006

Trend Line Bounce

Amazing sometimes how precisely the market reacts to trend lines. The Emini closed up 5.0 points at 1,388.50 on Tuesday. The low was put in today on high volume as anticipated yesterday. Are we still in an uptrend?

Emini Trend Line Image

The Emini gapped down at the open, 2.25 points below yesterday's close and 1.50 points below yesterday's low. Professionals took advantage of panic selling by the non-professionals and entered the market with large volume.  Yesterday I mentioned that the low had not been seen because there was no significant buying volume - well that is exactly what we got this morning.  The low for the day was 1,380.00 and the market eventually rose to a high of 1,390.50 and closed at 1,388.50.  Range for the day was average at 10.50 points and volume was above average at 1.5 million contracts traded.

Auto-Trend Lines

Classic Larry Williams Oops pattern at the open with a gap down and professional buying stopping any significant decline.  The chart above shows my auto-trend lines.  Sometimes it's freaky how precise the turn points are.  The Emini reversed exactly at 1,380.00 just where the trend line says it should. And don't forget, these trend lines are not plotted after the fact - they are generated by TradeStation code and know well in advance.

Which direction now?

All trend oscillators show a down trending market.  Today's bounce was professionals taking advantage of panic selling by amateurs.  I expect to see the market bounce a little further, maybe retrace to the 50% point around 1,395.00. If we get any panic buying and a gap open though - look out for the market to churn and start to reverse again.

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