RANGE RUNS AFTER FBO'S 5/31/13

When we have a channel (running trend) it has three options:  1. Continues to run high to low; 2.  It breaks out; and/or 3.  We have a failed break out.  Today we had a bull channel begin around 6 AM EST in the Euro Zone period and run into the US pre open.  (A)

At the open, we were holding at the dominant range (1651-1645.5) and the Short BOT (SB) at 1647.  We quickly ran the range to the Long BOT (LB) at 1652.  This is where we saw PA stall for a FBO of the bull channel and the LB.  A FBO of a BOT level is expected to run to the opposite target.  We had that (bull) from the open to bar 3, and the bear b5 to b8.  (B)

Support at the SB held and we run the range again for the bull still inside the channel.  The EMA holds for the PB and we run to the BO-5  (B) around bar 22.  Again, a FBO pattern that is expected to return to the prior level (LB).  If this happens, look for PA to reenter the range and run to the opposite target.  Today, the LB to the SB.  We essentially have a range bound (or trading range) day between the two BO-5 levels.

At the mid day, PA traded in a narrow, sideways action.  We see a flat EMA hovering around the LB.  Around point C, we break the EMA and the bull channel.  PA was rejected by the LB and likely to run to the SB.  We also see a gaping develop between the EMA and PA. (D)

A small bounce at the SB as the BO-5 shorts take a +10 cover, then the market continues to run the levels reaching a BO-20 support.