Trend line bounce today. The Emini closed down 8.25 points at 1,384.75 on Friday. Three trend indicators have now turned down but the market bounced on a rising trend line. Was this the break we are looking for?
The Emini has risen strongly over the last couple of weeks, so it was no surprise that we finally got a downside break. The market opened down 2 points, managed a small rally hitting a high of 1,392.25 and then dropped strongly to hit a low of 1,381.00.
Six touch points …
At this point, the Emini bounced on the rising trend line we have been talking about since 3 October. The chart above shows this rising trend line starting on 11 September and which now has six touch points! As we’ve said before, the more touch points the more significant the line. Any break of this line on large volume would indicate a definite change in trend. Anyway, the market rose after this and the Emini closed 3.75 points off the low at 1384.75.
Today's range was 11.25 points and volume 1.2 million contracts. Although this was a down trend day, with range and volume both above average, range and volume were not so large as to indicate panic. In addition, the TRIN reading (as I calculate it) was negative but not strongly so. I wouldn’t be surprised to see a bounce on Monday with the smart money taking advantage of the non-professionals and their decision making over the weekend.
As usual on Friday we also got the release of the Commitment of Traders data. This has continued to show the professionals selling into the rally this week. Commercial short interest has fallen from -6.3% to -7.7% over the week. Check out previous posts to see how I calculate this useful market sentiment data.
Trend indicators turn down
Lastly, 3 of my 4 trend oscillators have now turned down:
- Trading Index (TRIN) oscillator
- Secret #2 oscillator, based on the open and close prices
- Secret #3 oscillator, based on smart money
You can read more about these on previous posts using the category headings on the right-hand side.
Do a Google search for trend line to find out more.