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Saturday, December 03, 2011

"Fat Finger" look-a-likes

Below is a Weekly chartgrid of the YM, ES, NQ & TF.

While I was studying it this morning, I noticed the May 3rd, 2010 weekly candle...it contains the infamous "Fat Finger" May 6/10 daily candle, on which the YM plunged 1025 points, the ES plunged 112.75 points, the NQ plunged 232.75 points, and the TF plunged 73.30 points.

I also noticed the August 1st, 2011 weekly candle...its range is larger than the 2010 candle on the ES & TF...and is slightly smaller on the YM & NQ.

In the case of the YM, ES & TF, there has been similar subsequent price action around a moving average on both occasions...the 50 sma (red) in 2010 and the 200 sma (pink) in 2011...the NQ has held up a bit better since it didn't touch the 200 sma. Notice how price plunged in 2011 to around the top of the 2010 candle (mid-way on the TF)...a violent re-test of this extremely volatile action (pre-planned or coincidence?). The Bollinger Bands are beginning to narrow now, as they did in 2010...price subsequently rallied in 2010...whether they rally this time remains to be seen...and it may not be as "cut & dried" as it seems.

However, I'd submit that the following levels are highly important (approximately the top of the 2010 candle) and must be held (or re-captured and held if they are violated and recent gaps filled in) if the bulls are going to make a run for higher  highs on a weekly basis...and set the stage for a convincing new bull trendOtherwise, I'd look for more violent plunges ahead.

  • YM = 11000
  • ES = 1200
  • NQ = 2050
  • TF = 730

  • Also, what's different this time is the ranges on the 2011 weekly candles have been much larger following their initial plunge than the ones in 2010...no doubt a reflection of the weakness in Europe...this may continue for as long as the European debt crises remains unresolved...and it may be that price is reluctant to venture very far above the range that began in August of this year until some kind of definitive long-lasting action has been taken in Europe that would satisfy the markets once and for all. I realize that there are other global economic, financial and fiscal problems/risks which are unfolding each day, as well...so, it seems, that the bulls are taking advantage of relatively "quiet and temporarily positive" short periods of time in which to ramp up the markets...all good and well until the next catastrophic piece of news hits the fans, which seems to be happening on a regular basis.