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ES: TOP FORMATION DEVELOPING

10/17/2011

This week and the next I’m updating the ES, Gold, Crude, Euro for a German investment bank. Exactly the same updates I’m sending him you all receive.

8:09EST

ESZ11:

On 10/13;  I updated the following

 10/13/11

Closing Comments:

Yesterday we developed a top pattern, although this top pattern is the first of three patterns

Pointing down

Equalizer: 1198.50

Down Price Target: 1145.00

Up Price Target: 1251.25

 This pattern means we’re in the early stage (1st phase) of a topping formation

Trading above 1251.25 within 75 hours cancels the top formation

The top pattern formation is a series of further developing top patterns;

The initial stage is another 75 hours; often we trade above the patterns high (1216.00) without reaching the patterns up price target (1251.25)

Currently the key level (OAV) of the pattern is at 1178.00

Key support is at 1185.00/1185.25

Generally within the next 75 hours we will develop another similar pattern; generally larger, then a third pattern; basically this is a complex running C/T (Reversal patterns) then the top formation is in place and down we go.

Not taking out 1251.25 within 60 hours confirms the top formation is developing as planned, and it means within 731 hours or 30 days we take out 1068.00

 Now

We developed the 2nd pattern on the 73rd hour; and it is larger; I’ll get into its internal details later.

As I had updated many times; yesterday’s high and subsequent sell-off occurred on the Major (Major/Minor) resistance at 1230ish.

Now I’m answering your repeated question

I have not in any way, shape or form indicated for you to take profit, therefore you should still be short from 1230ish.

Generally speaking when we develop a second pattern (top formation) after the 2nd pattern is confirmed we either bounce (reflex only) or we pause before the next move down. We paused. The included chart is the key. We MUST close one bar below the lower purple dotted line (1188.25) in order to continue down and stay down. This move down is to 1172.75 to 1177.00 or lower; because the move up from 1068.00 has no internal support structures; only something resembling support is at 1129.00

Therefore I recommend taking profit on half at 1184.00; and moving your stop down above the green line at 1206.75;

In the event we fail to close below the lower dotted (purple line) not reaching 1183.50; take profit on 25% and place a stop for the remaining 25%  above 1195.00

We should see a decent bounce at 1183.25/50; staying below 1189.25 on the bounce is extremely bearish and expands the downside (below 1172.75/1177.00) to 1145.00