By Mike Paulenoff, MPTrader.com
This has been an extremely whippy day. In the first hour trading the indices came in lower and extended the overnight decline into the end of the first hour in both the E-Mini Nasdaq, which got down to about 1370, and the E-Mini S&P, which came down to about 1024. Those lows during the first hour appeared to be enough to break whatever micro support was in the market in the period between Friday's highs and Monday's close.
But sure enough the indices pivoted on a dime, as it were, and took off and now are perched and are consolidating at the top of the ranges from Friday and Monday. So this is a very interesting situation. One way to look at it is that the indices have carved out a sideways pattern that trapped the bears early this morning looking for a breakdown, and if that turns out to be the scenario, we should expect a thrust in the latter part of the session to new highs. My targets are 1040 in the December S&P and 1400 in the Nasdaq.
On the other hand, if the indices struggle and cannot rally above 1035 in the S&P, and in the Nasdaq cannot rally above 1390, then you have to wonder if the indices are actually out of gas and still are in this high-level congestion area, and sellers will come in and press the indices back towards the lower side of those ranges. So I would say the last two hours of trading today will be extremely important.
One final point: If the bullish scenario does unfold, then my work suggests that those highs anticipated in the S&P at 1040 and in the Nadsaq at 1400 will be the final highs for the up-legs that started on September 30.