Pre-Market Outlook – 8/17/2021

There was no follow-through overnight to yesterday’s morning turnaround and small pullback rally into the close. In fact, though all of the Globex range is inside yesterday’s range, the S&P 500 has retraced 61.8% of yesterday’s prices and sits near that level at this writing. 

Although we are squarely within yesterday’s range and trading around halfback currently, I believe there is some shock and potential for imbalance to this open as futures are opening well away from the bullish settlement and on 100% net short overnight inventory. Treat it like any other orthodox gap with the caveat that gap rules are not officially in play (not a true gap as we are opening within yesterday’s range). Since we know that the initial move should be to correct some of that overnight inventory, what actually happens will leave us with plenty of information.

This still leaves the possibility that we overshot the rising wedge yesterday and still may dip into the cycle low and options expiration on Friday. But it doesn’t matter. As with yesterday, we need to follow the usual plan and let the market take us where it wants to go.

Our first downside reference will be the Globex low at 4447, with our second reference at yesterday’s low of 4432.50, which is right above yesterday morning’s downside target, and last Thursday’s weak low at 4430. Above, our references are yesterday’s halfback and the overnight prominent POC at 4454.50, then the Globex high of 4472.25, and then yesterday’s high of 4476.50. Halfback at 4454.50 is my key bull/bear bias line for today.

As a side note, on instruments such as the S&P 500 index, both the ’33 and ’50 handles are always key lines, so the downside levels this morning are not surprising. Usually, if the market can hold the ’33 handle, it will get the ’50 handle. If it can hold that, it goes after the ’62 handle, then the ’77 and ’88 handles, etc. At some point, I will do a write-up on the 100 handle block and how the market works it on the way up and down.

With all these levels, monitor for continuation.

A.F. Thornton