Why this could be the 'big breakout'

Thursday's session may have been the breakout event we've all been waiting for. S&Ps held higher on the early drop and then led upside action into the closing bell. Overall it was merely a normal day's range, in rather V-shaped fashion. What might we have to decipher from the charts going forward from here?

ES (+$50 per index point)

S&P 500 broke out and closed well above its recent five-day micro range. Price action did come to rest just below upper channel resistance line we drew on this chart several days ago. 1240s is the next point of magnetism above, representing the highs from late September before October's swoon.

The gray box shaded pattern from September is an interesting phenomenon that has repeated itself four previous times this year and other times deeper in the calendar. Note how initial price break pushed upward out of congestion, stalled and then reversed to drop some -70 index points in rapid fashion. Going backward on a wider view of the daily chart pictured here we see where two other downside breaks of similar box consolidation patterns soon posted lasting bottoms before substantial rallies erupted.

Prior to the space on this chart, other box consolidation fake outs soon reversed to post much bigger trend moves than initial breakout. Thursday's move could be the start of a much anticipated year-end rally, but knowing that a pervasive pattern exists of recent box breakout reversals is something we need to keep in mind.

ER (+$100 per index point)

Russell 2000 did not manage to close above recent six-day highs, and lagged the ES relative strength all day. Small caps posted an outside bar bullish pattern, but still need to take out last week's Thursday high before we consider this one in breakout mode.

This Session:

ES (+$50 per index point)

S&Ps gave early sell signals yesterday near 1124 that worked down to 1218 and subsequent buy signals, the last at 1224+ again before launching straight up to 1232 and eventually 1235 to mark the highs.

Today will see 1228 and especially 1224 as two high-odds potential bounce points if touched on an early pull back. Any lift higher to 1240s first will negate potential for a strong bounce from lower levels such as these.

ER (+$100 per index point)

Russell 2000 gave sell signals near 661.50 that worked to 654 in the early going, before price action ramped in straight-up panic buying fashion. 661.50s and 658 are the two marks where any drop off the open should find willing arms to hold fast from there.

Summation
The micro ranges of past six days appear to have ended. An early drop today has high-odds of bouncing from support, while an early gap & go that flatlines midday has high-odds to drop in the afternoon. Endless scenarios exist for every trading session without exception, but today's outlook should be one of buying early or late dips while selling any emotional pops that gap & go before settling sideways or into a lower-high sequence toward the afternoon.

Have a great weekend, and we'll see you Sunday night!

Trade To Win
Austin P
www.CoiledMarkets.com
(Weekend Outlook trend-view section... open access)

Austin Passamonte is a full-time professional trader who specializes in E-mini stock index futures, equity options and commodity markets.
Mr. Passamonte's trading approach uses proprietary chart patterns found on an intraday basis. Austin trades privately in the Finger Lakes region of New York.