TPTB had two simple goals yesterday: get SPX back above its moving averages and bust the falling channel it’s been in since May 20. They succeeded on both counts.
We’ve seen this countless times over the past few years since algorithms and HFT took control of the “market.” Ramp the eminis an inordinate amount (usually on nominally bullish headlines) and, once the cash “market” opens, HFT the crap out of it — a nickel and a dime at a time — until a well-established pattern is busted and/or a moving average is topped.
It’s more subtle than the Chinese technique of prohibiting stock sales. But, in the end, it’s manipulation just the same. And, it has turned our normally functioning market into a “market” — where plunging retail sales don’t matter at all.
TPTB also succeeded in tagging both our upside targets — the most obvious on the chart. From yesterday’s members section:
The first hurdle will be the falling red channel top at 2094-2095 (also the SMA100 @ 2095.16) with a secondary target of the .618 at 2100 (also the SMA50 @ 2099.75.)
The important question we’re left with is whether yesterday’s algo-driven chart busting exercise will hold, or whether it’s more akin to the Jun 18 incident that began in much the same way but resulted in an 84-pt plunge.
continued for members…
I’m looking for at least a small pullback, with the leading candidate a backtest of the SMA100 at 2095 and the secondary target the SMA20/red channel backtest at 2089.
The eminis briefly and begrudgingly gave up a few points in order to backtest the .618 retrace from the May highs. They will try to hold the line, but that was a pretty awful retail sales report. There ought to be more fallout than a few points.
Note, also, that CL should provide some headwinds today as it might finally be allowed to test the .618 at 50.11. Unless it can regain its 10-day moving average (54.56) I’d want to be short for the next leg down.
More after the open.
UPDATE: 9:46 AM
Note that 2107.89 will also effectively backtest the broken white channel bottom.
Thank CL for the reversal — even though it has failed to retake the white channel bottom or the SMA10, for that matter.
CL is rallying, of course, to cover for USDJPY — which, as we discussed yesterday, has run into resistance at the red channel midline. This, after trashing the perfectly-formed falling purple channel in order to effect yesterday’s “rally.”
UPDATE: 11:16 AM
