Here is a daily chart of the December e-minis going back to late June. Last week I think the market staged a genuine upside breakout from its August-October trading range. The breakout levels are depicted by green dash lines on the chart. You can see that Tuesday's break dropped the ES right into that support zone but no further.This looks like a successful test of the breakout level. If so the next leg up should eventually equal the size of the first leg which was 221 points (blue dash rectangles). This gives an upside target of 1429 (blue arrow).
Looking back at the past three months I think the most striking fact is that the market only went sideways from August to October despite repeated bouts of bad news about the evolving European debt crisis. This is bullish behavior, at least in retrospect. It looks like the market is telling us that the Europeans will successfully "muddle through" the current crisis without crashing the EU monetary and banking system, at least not this time around.
