S&P 500 Emini Futures Day Trading THE GAP

S&P 500 Emini Day Trading Gap Monday January 4, 2010

S&P Emini 500 Futures are embarking on a New Year and, as always, one of uncertainty.  Prices have retraced approximately 50% of their value from the October 2007 high to the March 2009 low.  The question for the New Year is, how will the index perform over the next 12 months?  A possible scenario for 2010 might be seen in the chart’s weekly market action for 2004.  Like 2009,  the 2003 index had retraced approximately 50% from a market high in 2000, to a market low in 2002.  Succeeding price action in 2004 was primarily sideways, with some retracement of the prior year’s increase, before continuing the established up trend.  Should traders expect the same sort of price movement in 2010?  Who knows?  There are differences  between the two time periods that are noteworthy.  Prior price declines had occurred over a 2 and 1/2 year span in 2000/2002 as opposed to the recent price decline which took only 17 months.  The most recent price decline was also more severe.  That indicates the retracement for 2009 was much quicker than that in 2003.  The suggestion is that a 2010 retracement might be more severe than the 2004 retracement.  2004 retraced about 25% of the 2003 rally before resuming the up trend.  Look for a 50% retracement of the 2009 rally in 2010.  That should bring prices to the 900 level, but would still retain the established up trend.   Improving economic news in the latter part of the summer of 2010 might provide the incentive for a resumption of the 2009 up trend.  The caveat, as always, is to beware the Black Swan event.  Any unexpected news, such as a terrorist attack, or a major financial melt down, could completely undermine any market expectations.  That aside, traders should have a Happy 2010.  Happy New Year!