We do have a new pattern emerging since the lower trendline of the broadening formation was broken, and that is a broadening bottom. There is also a potential IHS developing as well.
You can see that 1141 was the top for the overnight action, and in the event that continues to be the case, then we should expect a downward breakout with a target of 1082 ES. Broadening bottoms, despite the name, break upwards only 53% of the time. On balance though, and with the IHS as well, the upside target at 1172 ES looks more likely. Reading around the blogosphere this morning, everyone's expecting a rally today, and I'm not seeing much to contradict that.
If ES did rally to 1172, then it would meet a key downswing declining trendline from the top there, where I would expect the rally to fail unless this downswing is over:
The potential IHS patterns are also well formed on Nasdaq and Dow, here's the Dow version of it:
You can see on the Dow that the lower trendline of the previous broadening formation has already been broken, and the same is true on the Nasdaq. I'm definitely leaning long today.
Longer term though, more downside looks likely. I see from Mortie's post on slope overnight that he is forecasting a strong wave down after this short rally. There is strong evidence to suggest that on the FTSE at least, as there is another, and much larger, right angled and ascending broadening formation on that.
That pattern on the FTSE is a monster, and signals a fall of almost 20% from yesterday's close, falling almost to the low last July. The UK has very serious problems of course, and if commodities particularly take a serious hit, then the FTSE will be one of the most affected.
As I write 1141 has just been broken on ES, and if we see a break with confidence of the upper trendline of the broadening bottom, currently at 1146.5 ES, then I'm expecting that we'll most likely see 1170 ES today.
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