By Mike Paulenoff, MPTrader.com
Interesting day is shaping up largely because yesterday all the indices pivoted to the upside off of sharp down-legs from Friday morning's highs and closed firm having retraced or recovered most of yesterday's gains. Those gains happened to amount to about 35-40% of the entire down-move from Friday.
Having said that, the question is how much further of a recovery, if any, were the indices about to give us. My work suggests that we have sort of a complex countertrend rally in progress. That is to say that this morning's peak has given way to some mid-day weakness. But my sense is that this mid-day weakness is just an intervening pullback, and that after it runs its course -- which, by the way, it may already have run its course on the downside -- another rally will transpire that will test today's highs.
If that turns out to be the case, then you'll get a test of the 1048-49 level in the E-mini S&P and the 1406 level or so in the E-mini Nasdaq. In the Qs, since we're on the subject, we'll get a test of the 35.00 level.
That's what I think is unfolding: a pullback and another rally later this afternoon.
The problem with this scenario is that if I'm wrong the only way we will know that the correction from yesterday's low is complete is if we go through yesterday's lows. So, unfortunately, even if we go through 1040, for instance, in the E-mini S&P it's only a break of 1034