While momentum buyers have been in control the past few sessions, the S&P 500 index has hit its Weekly Expected Move (“WEM”) high for the week and will likely be rangebound through Friday, with the WEM level around 4250 acting as a magnet. The index may be able to squeak out a new all-time high above 4258, but it would have to punch through the WEM high at 4250, and there is a 70% probability the index will end the week at or below that level.

It also appears that whatever fear Fed Chairman Powell and Fed Governor Bullard may have temporarily injected into the market, traders are discounting/ignoring the coming QE “taper”  in a big way.

Globex activity failed to test the single prints of yesterday’s regular session. And yesterday’s distribution came down to the same level as the overnight low and rallied from there. Between yesterday and Monday, there is a lot of emotional trading (short-covering) and poor structure below the current level for the market to repair and carry forward potentially.

Last night’s overnight distribution also stopped sellers just shy of yesterday’s Point of Control (POC) at 4230.75. Markets that test visual and mechanical (not to mention nuanced) references like this are controlled by short-term traders rather than longer-term investors. This is not necessarily negative or unsustainable. If anything, one might see it as bullish as this faction of traders has not proven to be easily shaken and can stay in charge for long stretches.

Coming into today’s session, we have a key level above us that is noteworthy and could be the key to higher prices should it be taken out. The overnight high at 4248.25 stopped right at the same price where two recent day sessions also topped out. Use this as a potential go/no-go break-out level, keeping the WEM high at 4250 on your radar too.

Yesterday’s single prints also should be entered into the larger narrative, even if they aren’t exactly key levels today.

Assume buyers are in control and will continue to be today. Pullback buys are probably the best strategy unless the market signals otherwise. Watch the 30-minute range first. Also, after two trend days, a range day is in the cards.

Any breach of the overnight high level puts the all-time high at 4258 into play. That all-time high was made in an overnight session which makes it less secure. The market will likely pull back to the WEM high on a pivot lower even if the index breaks out. The NASDAQ 100 is almost at its WEM high as well.

A.F. Thornton