Here is a daily bar chart of the March 2012 ES going back to the October 4, 2011 low.As I have explained in previous posts there is strong resistance near 1375 for two reasons. First, the 2011 high on May 2 of that year was 1373.50 (red dash line). Second, a rally from the November 25, 2011 low which matched the size of the October 2011 rally would have ended at 1366 (large blue dash rectangles).
Today's price action looks like a downside breakout from a small trading range which had formed during the past two weeks. I think it means that the ES is headed for the dash green trendline. A more precise estimate of the upcoming break is the size of the drop in early December which was about 71 points. That gives a downside target of 1306 (small blue dash rectangles).
I think this is only a normal correction in an ongoing bull market. There is still the possibility that the ES is forming the top of a domed house (see this post) but if so it still should rally above its recent 1377 top before the top is complete. A more bullish prospect is that there is no ongoing 3 peaks and a domed house formation and that instead the market is headed for its 2007 top at 1587.
