Weak market overnight, with the sell flow picking up around 5:30am. I think it’s important not to locate the driver of this weakness as if it’s derived from some other market or currency, but instead to understand where the S&P 500 is trading contextually and where it could potentially go.
Although we’re pressing upon all time highs, it wouldn’t surprise me to see the market settle into a range over the coming week which means we need to be prepared for possibility.
The bulls will want to give up as little of the progress made on 07/11 (the Bernanke move) as possible to show their faith in The Fed. Bears want the 1688 level to hold, where they flexed their liquidation muscles and pressed the market lower.
The overnight profiles suggest a lack of balance and potential for large directional movement today if we see a breakout above 1680 or a breakdown below 1675.
Breaking 1675 sets up a test of yesterday morning’s globex low down at 1671.75. If that price fails to hold, the market will look to work down to 1666.
However, the market is showing significant signs of being oversold this morning, and given the weekly opex nature of Friday, we may see aggressive buying coming in early on. Buyers need to get us on the other side of 1680 and hold it if they want to hold the upper hand.
I’ve highlighted these levels in the following profile charts:
Good analysis, Raul!
Thanks chess, huge buy flow since the lows