Mar 012011

Lately I’ve been writing about a potential market turn in ES & Stoxx and the corresponding turn in the Euro Bund.

ES got off to a good start but then it bounced back up.  When the retracement went above 68% I thought we’d retest the highs again but today is a major down day and it shows me that professionals are not finished selling and they were just waiting to sell the bounce.  If you look at the ES volume (not shown) you can see it was much lower for the two up days.

I was surprised that ES stopped short of the gap area on the way down, I expected at least a test of this gap.  It looks like ES is headed back down and this time I think the gap will be tested.  The result of the test will be very important.  The two possibilities are ES goes back up to retest the highs or ES continues down into a major correction.

The bund has been very telling, not only did it break out before the drop in equities, it is holding its gains and staying in its balance area.  As long as it keeps going up then I expect the equities to continue down.

I hope your trading is going well.

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