FuturesBlog.com – Emini and Futures Market Analysis by Chuck Kowalski

Technical Setup In E-Mini

Posted on July 8, 2010 by Chuck Kowalski

In my last couple articles I mentioned the ultimate move in this market may only come before the technical picture morphs into one confusing move after another.  Ultimately there will be a strong move in one direction, but which direction is the question on many traders’ minds.

The current technical setup has a spike bottom after a break of major support.  This is bullish if there is follow-through.  You can see the market had an inside bar following the spike bottom and then a breakout higher.  That brought in a good deal of buying, which one should expect.  There has been no failure of this bullish setup yet. 

I am negative on this market long-term, but I still need to look at the current setup to catch the momentum of the market.  The pattern has evolved into a failed triangle breakout to the downside and that short covering is giving the bulls ammunition. 

A good case could be made for a wedge forming here, which would be bullish.  There have been three pushes lower and now the market might test the downtrend line around 1,090 – 1,100.  The downtrend line might determine the ultimate direction in this market.  There have been a lot of false signals recently, so traders are probably leery of buying breakouts.  This is usually the time when the legitimate move comes.  Will the market breakout above the trendline or get rejected and send the market to new lows?