What This Gartley Pattern May Indicate
The December S&P 500
futures (SPZ and ESZ) opened Tuesday’s session with a +3.50 point gap
to the upside after Sept. Durable Orders and most of the earnings reports were
reported in line with estimates. After filling 1/2 the gap, good broker buying
came in ahead of the 10:00 Consumer Confidence report, which came in higher than
expected. The contract whipsawed to the high of the session on the news and then
drifted into a pre-FOMC 2 point range.
The announcement that the Fed had left rates
unchanged and would remain accommodative for a “considerable period” was the
prelude to one of the most muted initial reactions we’ve seen in a while. Some
of the brokers started playing reindeer games, bidding for size in an attempt to
goose price up, and then pulling their bids. The ploy worked and the usual three
moves off of the announcement finally played out in a sloppy fashion, with the
futures hitting a new session high. The follow-through buying and the ensuing
stops getting hit helped to snowball the effect, causing a squeeze in the final
30 minutes.
The December S&P 500 futures closed Friday’s
session with a gain of +14.00 points, and closed in the upper 1/2 of its daily
range. Volume in the ES was estimated at 648,000 contracts, which was ahead of
Monday’s pace and right at the daily average. On a daily basis, the contract
broke back above its 10-day and 20-day MAs, with resistance now at the Oct.
high.
On an intraday basis, the 60-min chart broke the
bull flag and also the neckline on an inverted head & shoulders pattern, but is
also forming a bearish Gartley pattern that projects an AB = CD double top in
the 1,047 area (see chart). The 13-min chart broke the cup and handle pattern
off the open and then broke a subsequent cup and handle after the FOMC
announcement.
On Wednesday morning, the economic calendar is
report-free with nothing scheduled until Thursday morning’s Q3 GDP report and
Weekly Jobless Claims.
Please feel free to email me with any questions
you might have, and have a great trading day on Wednesday!
Chris Curran
chrisc@tradingmarkets.com