Futures bounced sharply after plunging nearly to the 100-day moving average yesterday, ping-ponging up to backtest the 50-DMA.SPX should have a decent shot at closing yesterday’s gap before the action resumes.

continued for members…The equity picture:

So far, ES has shown us a higher high followed by a higher low.

While SPX never did make a higher high.  So, the signals are somewhat muddled. As COMP’s SMA200 rises above the .886, it becomes more likely that the .786 was the primary target instead and that all of this bouncing around was nothing more than headfakes. Note that COMP has made a lower low. All of the factors remain in position to put the brakes on any additional downside, or maybe just downside that gets too exuberant.

One interesting chart development yesterday was on DBA – the agricultural ETF. I’ve suggested in the past that inflation would have trouble declining in any meaningful way until DBA retreated from its Nov 11 breakout and, ideally, broke down.We got the breakdown below the rising red TL, and a subsequent backtest of the white channel top. But, so far, no breakdown of the white channel top which would be IMO a watershed event.

UPDATE: 9:50 AM

SPX has closed its gap and is backing off. I’ve adjusted the timing on SPX’s downside targets, which continue to be much more clear cut than ES’.