Good Morning Traders!
Today is Columbus Day and that means that the Fed and banks is closed. However, all markets remain open and there should be decent volume after Friday’s downside break.
The lower end of an eight day trading range was decisively taken out. A rough measured move projection can be derived from taking the width of the breakdown box and looking for a measured move down. The alternative would be a sharp price rejection spike back into the range on Monday (least probable scenario). The weekly chart shows that the cash SP has not traded down to the lower Keltner Channels since Fourth Quarter 2011. The divergences in the slow line (the pink line on the chart) suggest that this is a possibility. 1857 basis the cash is the current level. So this is all a possibility Big Picture.
However, the short term summation tick is deeply oversold after Friday’s sell off. The closing Tick indicator, breadth oscillators, and the RSI on the DOW are not close to being oversold. Thus, any reactions up continue to set up shorting opportunities. Additionally, the bearish readings on Investors intelligence have been at multi year lows for the past few weeks…..suggesting that this sell off can continue for an extended period of time before those readings reflect levels traditionally associated with bottoms.
The chart of the Dollar index has a Sell Short day on the 2-period ROC. A 240 or 480 minute chart of the EC should serve as a good road map for the upward correction in the currencies. The Dollar index made new momentum highs on the weekly charts and can continue to fill out range for the next few weeks as it consolidates.
Sunday evening it appeared the thee Sps might get an opening gap down. However, this played out overnight with the gap down in the European markets, which have already rallied.
The previous days low (1893.25) is the main reference point. 1906 is resistance above this. 1884 was the early overnight volume node to the downside.
have a good trading day – volatility is back!
Markets in BO Mode: