The ever so elusive pullback!
Remember way back when the market was falling and bulls were calling bottom after bottom. They seemed to be in a never ending situation of waiting for Godot to come. Now, the tables have turned, and it is a meaningful pullback that does not seem to come.
We have been watching a chart of September S&P futures for a few days now.
A few days ago, I said that the top of July 27 (984 Sept ES) had the potential of being the top for, at least, a pullback. That top has not been violated yet, but the price action since then has been extremely choppy. That makes me think that maybe we are in a sideways correction/consolidation that may be all the market is going to give back.
If that’s the case, the area between 960 and 990 (cash index) should contain the chop-chop.
We have also discussed that a break below 960-965 is needed for a meaningful pullback to have a chance. My view on that is still the same.
If the July 27 is not bettered, and 960 (cash index) is broken to the down side, the probabilities of the decline to be the beginning of a bone crushing fall to retest, or undercut the lows of March will be low. Why? Because the action so far from the peak of July 27 has been choppy.
An extended, steep decline to the depths of hell is more likely to be associated with an impulsive, free flowing wave structure. What we have seen these past few days looks like a tug of war between bulls and bears, and that, typically, is a churn, it can be top, or a consolidation. We just have to wait and see.
So, as long as index stays above 960, there is a good chance for the index to relieve some short term overbought conditions and get ready for another run up.
Also, because of the choppiness, instead of spending too much time on the ongoing minute-by-minute wave count, I will focus on trend lines and support/resistance levels till things clear a bit
We have a nice channel on the 60-minute frame
There is an area to the right of the channel that looks like a buffer zone, or battle zone depending on how you look at it
This area should cushion pullbacks. Otherwise, a change in price action characteristics may have occurred.
Notice that as I am writing this, 5:00 am, an assault in underway on the July 27 peak of the S&P futures.
One of the characteristics of the rally since March has been an outperformance by the Tech sector, which we have been discussing very frequently.
This is a chart of Nas100 futures that I shared with my OEW colleagues yesterday evening.
The point I was trying to make was that it all looked like a consolidation to me.
Overnight, the chart became lively and started running
I shifted my count, but have kept my original count as an alternate.
If we look more closely,
It successfully tested the top of the consolidation zone and went higher. I think it is important to see how the techies perform, and as long as they do well, the market may either hang in there, or go higher. It may be the last dash at a new high, or just the first wave of an extended run up. Just pick your spots and play safe!
I really find it bizarre that this very obvious outperformance of the techies has not been discussed widely in the blogosphere or main-stream financial media.
To each, his own!
For the day volume was above average. Breadth was negative.
Notice McClellan Oscillator has pulled back sharply. That is in contrast with the tight, sideways action n of the day. One day a Rome did not make. Let’s keep an eye on it and see if it makes it to neutral and what it does there.
This is a 15-minute chart of the indexAs long as the support zone of 960-965 holds, index has a chance of gathering energy to make it higher.
I leave you with these charts
Notice the positive close of the ETF and the volume
Notice the lacklustre volume and the negative close.
You draw your own conclusions :-)
Have a Nice Day!
PS. Tomorrow, I will start my well deserved, long-awaited vacation. We will be staying in a chalet in the beautiful mountains of Quebec. I have plans to sips good wine, soak in the heated pool, and admire the scenary. I may not be able to post as regularly as I usually like, we’ll see.