Yesterday’s price action was puzzling, although that doesn’t necessarily make it worthy of serious reflection. Usually I get a hit off red/green patterns displayed by my Tradestation ‘radar’ screen. But amidst Monday’s flatulence, my home-grown indicator was all over the place. The usual bunch of high-fliers got whomped for most of the session, eventually dragging the broad averages down with them. Someone in the chat room said that a statement made by Icahn tanked the market late in the day, but I seriously doubt that the stock market much cared what he had to say. My guess is that it was all about rotating money from dot-com stocks into the Dow. Even buzzards grow tired of eating the same offal every day.
In any event, the 1816.75 rally target proffered here yesterday is still in play, and your best ride for catching a ride to it may lie in bottom-fishing the 1784.00 p midpoint or, using camouflage (because it coincides with a key low), the 1777.25 d target of the pattern (see inset). The pattern’s crisp, single-bar coordinates suggest that you may be able to dispense with camouflage at p if trading only a single contract, and that a stop-loss as tight as three ticks would suffice.
Note that an alternative ABC pattern that I’ve highlighted targets 1808.25, with a p sibling at 1792.75. The pattern is so clear and compelling that I would surmise that the S&Ps are in at least minor trouble if it is not reached straightaway. But the futures would likely have to close above the 1792.75 midpoint resistance to be ready to frolic on Wednesday.
On re-reading the above, it is so convoluted that I’m going to suggest that you simply study the chart and draw your own conclusions, trading them as you see fit.