We have been in a strong price rally from the June 18 low, which has become an 11-bar bull micro-channel (one-time-framing higher). That means every low was at or above the low of the prior bar. It is a sign of strong, relentless buying.
Volume has been summer lite, so when institutions finally step in, they could crush the short-term bullish momentum traders in a heartbeat. That is especially true when price action is at such an extreme as now. It will soon attract profit-taking. At the very least, there should be a one to three-day pullback within the next few days.
The bulls will buy the first pullback. The bears typically need at least a micro double top before they can get more than a few days down from a microchannel. The measured move target is still around 4,400 for the breakout above the three-month trading range. There are
several choices for the top and bottom of the range. Many computers will use the May 7th high and the May 12th low., which puts the measured move up as 4,404. The top of the bull channel is around 4,450, and it is also a magnet above.
As usual, I will ignore the limited holiday trading that occurred Sunday night and Monday. I will instead use Friday’s session as the reference point for today. So from that perspective, we will be opening inside Friday’s range but in the upper one-third of the profile. Overnight inventory is balanced, so there is little to guide us for opening trade.
The short-term bias remains bullish but with a significant risk for a liquidation break on the weak structure underneath us, which is becoming even weaker. Even on the profile chart, the price action appears to be a vertical blow-off. We are approaching a three-ATR channel line on the 24-Hr S&P 500 Index Futures daily chart. Read the commentary from “View from the Top Down” this morning to better sense the macro picture.
Besides the absence of volume, evidence that momentum traders are running the show continues to mount with an overnight low right at Friday’s halfback and many other weak lows, VPOC’s and gaps below us. At some point, this shaky structure will repair and repair swiftly.
The overnight distribution has a 45-degree line from the low to its widest point. Carry this forward into your narrative. Normally, this is a short-term bullish signal. Holiday trading may make the principle less reliable today.
We have a marginal, new all-time in Globex, so there is little to discuss on the upside other than measured move targets and top channel lines. I continue to list all of the Key Levels below, which will be targets should any liquidation break occur.
It has now been 11 sessions since we’ve had any lower value, not to mention that we’ve been one time-framing higher for those sessions as well. That should tell you that only a move below Friday’s RTH Low at 4319 has the potential to change the tone to negative.