In the S&P 500, a volatile range built in late April/ early May. When this broke we saw a huge sell off that came to be known as the "flash crash". Note we made a strong momentum low. The S&P rallied right back into the previous breakdown level in a clear ABC type move where A=C. This was a great risk/reward short. Here we failed and when price broke the trendline, a sell off ensued once more right back down to the lows setting up a double bottom trade.
Emini S&P 500 Continuous Futures 60mins: April/May 2010
A very similar pattern is playing out in the Nikkei 225. Below is a chart of the June futures. We built a volatile range PRIOR to the earthquake. On the news of the earthquake, this market broke making a strong momentum low. This market is now rallying right back into the previous breakdown level and an A=C target. This target is 9650 to 9800.
Nikkei 225 June Futures (SGX) 60mins
For now, there is no trade. However, I think this pattern and setup should certainly be considered in the coming days. I believe there is a change to margin requirements on Monday and this will add some volatility.
Thanks
Austin
