So far on every pullback on our stock index futures charts we’ve seen a hold at the first strong 45 minute support levels. Here’s the current 45 minute TF chart:

Click on image to enlarge!

The decline from the current daily swing high started this past Monday, October 25th. The high is shown as point “A” on the chart. Tuesday’s rally, B to C on the chart, stopped at the .618 retracement of A to B. We then projected for point D by calculating the 1.272 and 1.618 targets of the swing from point B to C. These targets straddled the major .786 retracement support level, calculated by running the retracements from the October 21st low to the October 25th high. This is a classic ABCD corrective move, and it also qualifies as a Gartley support pattern since point D landed at a major support retracement from a larger prior swing. We knew to look for this low as of this past Tuesday since the pattern matched all of the necessary support parameters.

The main intervening resistance level is the 100 percent projection of the swing from B to C, projected upwards from D. If we’re seeing the start of a new downtrend we’d expect that to hold in order to maintain the pattern of lower lows/lower highs on this timeframe. That’s the resistance level in bold at 705.60. In this case we should also keep an eye on the .786 resistance retracement at 711.30, calculated by running retracements from point A to point D on the chart. If that breaks, we’re looking to the next labeled target at 722.24. Ordinarily we wouldn’t be too concerned about the .786 resistance within this pattern once the price projection resistance (705.60) breaks. But there’s a higher timeframe factor to consider.

On the Russell cash daily chart:

Click on image to enlarge!

Price is currently holding below a major .786 retracement from the April high to the July low. Since a break of this level would imply that we’ll see the 789.00 target, the current struggle at the daily swing high becomes key and potentially pivotal.

If there’s a breakdown in store, the first sign of a shift in pattern will be failure to hold the 45 minute support levels on a pullback. So far that support has held firm on every test since the August low.

For more from Mark including his “Chart of the Day”, visit MJBraun.net.