Morning Headlines Into Liquidation Break
While traders might blame the unfolding tragedy in Afghanistan for the liquidation break this morning, the truth is that Fed Governor Kaplan jawboning ahead of the Jackson Hole meeting might have a lot more to do with this. The key level identified this morning did hold at 4476.25, though we did dip into the single prints a bit before it turned around.
I am watching whether the current reversal and bounce is merely an ABC, two-step correction on the 5-minute chart. I am long from the trigger line buy signal at 4476.50 – also near the measured move low. We are bumping the 15-min, 21 EMA mean, and I would pay attention and sell if we cannot break above that.
The way I see it now, the key to the break is WWSHD – when what should happen doesn’t. We did not even get down into the Gap from a few days ago. All we got was a measured move down from the opening range, also supported by some of our key levels. It should have been much worse, especially in a news-driven break. The buyers have been very aggressive so far.
Until suggested otherwise, the bulls are still in control. But today and tomorrow will continue to be volatile.
This morning supports the necessity and vigilance of using stops. Don’t leave home without them.
Remember, the catalyst to eventually bring the market down will be anything else we haven’t thought about that could go wrong.
A.F. Thornton