All references to the market relate to the S&P 500 Index Futures continuous contract, 24-hour session.
Traders finished yesterday’s session short in the hole, but also at a Fibonacci 38.2 retracement from the recent market top – a typical bounce point. Unsurprisingly, then, overnight trading was net long as there likely was some buying and short-covering.
That also gives us an orthodox gap higher this morning, meaning the gap is still within yesterday’s range. Fear gauges are high (which is getting bullish), and the market is looking short-term oversold (also bullish). All in all, a bounce is in order today, and then some balancing (sideways) action.
Swing Traders
Your day is coming, but continue to hold for the Navigator Algo to conjure up a buy signal.
Day Traders
I promised you a volatile week on Monday, if for no other reason than the Weekly Expected Move is double any typical week. Today is December 1st, and fund flows should be positive over the next few days.
But the monthly candle turned out negative for November, casting a negative pell over December. The cycle bottom stretches into mid-December, so any relief rally could be short-lived. Be sure to mark the monthly RTH session open this morning on your charts – it will be important this month.
After the spike higher, look for a potential balancing, inside day today and trade the extremes of the value area if the market is so inclined to deliver the sideways action. Use the halfbacks at 4600 from yesterday and overnight as your bull/bear threshold today.
Your first downside target is the overnight low at 4571.50, then the RTH low at 4557. Traders have been trying to push the market into the 50-day line around 4530 for three days, but the market does not seem to want to tag it. Nevertheless, keep the line on your radar.
Upside references begin to shift to the five and 21-day lines, both hovering around 4635 or so. Those lines have to be conquered on a closing basis to put the bull back on the table. There is a downtrend line converging on the two lines as well, so this area will be tricky, and it might be best to sit out the battle. In recent 80-day cycle declines, this same area has been a bull trap, so be careful.
Good luck today. Instructions for tomorrow’s trading room will follow later today.
A.F. Thornton