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

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.


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

Trade To Win

Austin P


(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.