Correction Could Set Stage for Healthy Rally in 2013

CME Group E-mini S&P 500 Index futures may have further downside beyond the eight-week lows reached in late October after bullish traders failed to crack chart resistance around 1,460, technical analyst Robin Mesch said in a monthly report.

"Unless we see an immediate rally early this month back above 1,420, which would likely trigger a rally to 1,430 to 1,440, we can’t rule out a further decline toward 1,380 or lower," the Oregon-based Mesch, a CME Group featured contributor, wrote in a monthly outlook.

This deeper correction scenario would be set in motion if the market falls below 1,390, but reaching a "value" range of 1,350 to 1,380 "could be the ideal prescription for a healthy rally in 2013," Mesch said. In trading November 1, December E-mini S&Ps traded around 1,423.25, after dipping to 1,393 earlier in the week.

In other CME Group markets, Mesch said sellers in WTI crude oil futures are "struggling to retain control" as the market hovers around a critical chart support at $85 to $87 a barrel. Still, these sellers have not yet given up, and she’s inclined to give bearish traders "a little more time" amid ideas prices may sink as low as $77.

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