Wednesday, September 02, 2009

Midday Briefing for September 2nd: Trying to Turn Around?

Here we see a candidate transition pattern in the ES futures, where a momentum low on heavy selling is followed by a price low on reduced selling pressure and volume. (For more on the transition pattern, check here and here).

It's not an ideal example of the pattern, because we normally want to see distinct non-confirmations at the price lows. At this juncture, we have already registered more 20-day lows today than yesterday and the major sectors have also followed the averages to price lows. We would need to hold above recent lows at ES 995 and then break through overhead resistance in the low 1000 area to confirm the pattern. I would become particularly interested in the pattern should we get further price weakness that is accompanied by indicator and sector divergences.