The futures again accomplished what the cash markets could not, ramping 15 points over the holiday weekend to present a mildly bullish view this morning.
UPDATE: 9:33 AM
SPX is approaching the .618 (1653.45) of the last leg down from 1669.51. This should be the first test of the market’s ability to break out of consolidation. Breaking through 1646 was a good start.
We’re getting a pause here, resistance from the small rising purple channel midline. Look for a backtest of the red midline at 1645-1646.
SPX has almost reached the red midline. If this is only a B of C corrective wave, then we should see one last spurt higher to the .618 (1653.45) or possibly 1656.02 to close the gap from Aug 26.
Taking an interim short position here at the red midline at 1645. The next support level is the .618 retracement of the latest wave up at 1636.96. It also marks the bottom of the purple channel.
However, a retrace to the .786 at 1633.04 would set up a measured move to close the 1656.02 gap.
UPDATE: 1:08 PM
Going long here at 1635. Tight stops, as this could be just a backtest of the purple channel bottom at 1637. If so, the .786 at 1633.04 or the .886 at 1630.71 are up next.
I think I jumped the gun. Short again at 1637 with stops around 1638.
Still inching down, very close to the .786 at 1633.41. The RSI charts suggest a little lower still.
Stopped out at 1638, back to the long side. I suppose we’ll get the usual late-day bounce here, but don’t see the immediate upside other than a lackluster bounce off the purple channel bottom.
The bounce at the bottom of the red and white channels on the daily RSI confirms the purple channel bounce. It even shows a little positive divergence. But, there are longer term channels whose midlines — just above — should be even more influential.
It was this 15-min RSI chart that had me expecting a tag at 1633 or 1630. Now that its daily candle has been magically transformed into a more bullish omen, the futures will probably gap down to tag one of those levels overnight.
In sum, I still see plenty of downside potential. I’m just not willing to hold short overnight to capture it — not without a little more clarity. There’s a good chance of rallying up to 1643-1645 for a Point C to establish a Butterfly Pattern that targets 1621.70 — in line with the red 1.618 at 1620.84.
I’ll likely go to cash at the close.
UPDATE: 3:47 PM
Closing out the long position and going to cash here at 1639.