Thursday, May 20, 2010

20/05: Markets drop >3.5%

Markets today executed a classic capitulation move, which I expect to continue in the initial hours of tomorrow's trade. According to my own research, the market low MIGHT be 1063.5 in the E-mini S&P500 Index Futures, a level divined by highly robust Fibonacci levels; see the chart below:

Overall, the market indices recorded the following performance statistics: S&P500, -3.9%, or -43.5 points, to 1071.6; DJIA, -3.6%, or -376 points, to 10068; and NASDAQ, -4.1%, or -94.4 points, to 2204.0.

Next, here's a 1-minute bars chart of the /ES, showing the extent of today's intraday swings. It appeared around 13:45 EST that the day's action would be a classic inverse head-and-shoulders pattern; however, price action from about 14:30 and into the close negated that interpretation. With the market's post-close foray to a low of 1063.0, I am obviously somewhat concerned about my theory of this representing a durable bottom; I suppose that tomorrow shall bring the definitive answer! Without further adieu then, here's the 1-min bars, /ES depiction:

Finally, here's a tantalizing chart with which to close out; volatility is certainly reaching a significant resistance point. Not shown is the fact that VIX, at today's close of 45.79, is within a historical 10-year resistance range of approximately 45-49. The VXX, an ETF of VIX, follows:

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