Pre-market update (updated 9am eastern):

  • European markets are trading -1.2% lower.
  • Asian markets traded 0.6% higher.
  • US futures are gapping significantly lower, in excess of 10 points on the SPX. 

Economic reports due out (all times are eastern): MBA Purchase Applications (7am), EIA Petroleum Status Report (10:30am), Beige Book (2pm)

Technical Outlook (SPX):

  • Huge bounce out of the market yesterday, wiping away over 2/3’s of the previous day’s sell-off.
  • However today we are seeing another significant sell-off.
  • Typically, these types of sell-offs where we gap down strong are very difficult to sustain. In fact, more times than not, the lows will be established withing the first hour of trading and then we’ll see a resulting bounce thereafter.  
  • We are well off of overbought conditions. 
  • We saw the VIX dropped from the 17’s back down below 14 again. 
  • Strong volume on the rebound yesterday, but nowhere near what we saw on Monday’s sell-off. 
  • We are back outside the previous consolidation range. 1538 is a KEY price level. If we break below it, conditions become increasingly bearish. 
  • 1548 represents the rising, lower channel band. As long as that rising support level is not violated, the trend thereby remains intact.
  • Markets don’t care about the economy. That is not what is driving them. The markets only care about what the Fed is doing to keep equities propped up. 
  • Both channels (July October 2012) and the price channel we are currently in are very similar in nature. 
  • We haven’t seen a market pullback in excess of 4% since October/November time-frame. 

My Opinions & Trades:

Chart for SPX:

SP 500 Market Analysis 4-17-13