It is not too late for the market to take a spill here, but it is not happening. Importantly, 4230 on the 24 Hour S&P 500 Futures index (about 4237 on the cash index) is the max tolerance for a short trade. That is the 78% retracement of the decline which defines the down vs. up trend. With the NASDAQ 100 at new highs, and the S&P 500 cash index already above its equivalent 78% retracement, buyers have taken control.

While this continued rally is unexpected, we have to consider that the math is such on the S&P 500 index that the big cap tech and growth stocks have enough weight to carry the index higher, even though the majority of stocks are declining in the broad market.

The behavior creates the breadth divergences we often see at tops. But I won’t argue with it until we are there. So we are stopping out of our short position for a very small loss, and will regroup tonight after we see the close.

We are approaching the Navigator buy trigger on the daily S&P 500 chart. If the short didn’t work, lets see whether we can trip a buy signal. Again, this is not what I had expected, but I never argue with price. If the reversal pattern is taking, we are only halfway to the minimum target, with 60 S&P 500 points to go. 

The bears had their chance to press their case at the low today and failed. There just are not enough sellers yet to take us lower.

My next update will come before the open tomorrow. There is nothing that is likely to change between now and the close. If there is, I will let you know.

Look at the reversal pattern on the S&P 500 Index Futures chart using 24 hour data and 2-Hr candles. It is hard to argue with what I see, even though it was not my first choice.

A.F. Thornton