The market (as represented by the S&P 500 index) is trading in a range between its 21 and 5-day lines. We only had a partial gap-fill (better than nothing), as seen in the 5-minute regular session chart above. The 21 is an intersection of the weekly and daily lines – a bit more formidable resistance. As expected, the WEM High is acting as a magnet as Market Makers defend the price.
If the market could take the WEM High out decisively, it would force Market Makers to buy futures to defend their positions. In furtherance of this possibility, the market is holding the overnight low, and the put/call ratio is high (bullish). Also, in similar downdrafts and gaps, the S&P 500 A/D line will usually pin at -400. It has managed to rise this morning.
My observation is that the market does not want to drop any further than the morning gap for now. But there is a math problem with the NASDAQ 100 pulling the S&P 500 down, while institutions are accumulating positions from less famous names that started their corrections in the middle of last year, names that in some cases are down more than 50%. Money managers might steer clear of the popular big-cap growth stocks until Amazon reports tonight, and the picture is clearer.
A.F. Thornton