A Reversal Day for the SPX?

SPX Daily 130613Good evening, Friends. When I looked at my charts last night, it appeared to me that while the SPX remained in a tenuous uptrend, it was failing. I wasn’t sure what to expect today, but “Big Rally” probably wouldn’t have made my top three most likely outcomes.

When I took a glance this morning before heading to the office, I was surprised to see that with the Nikkei significantly lower overnight (-6.35%), the U.S. futures were only down a couple of points. I’ve bored you by pointing out that there’s no particular reason in my view why price action in Japanese stocks or the Yen should be driving U.S. prices, but traders have been reacting to those signals, notwithstanding my views. Given the recent pattern, the reluctance of the futures to follow the Nikkei’s lead counted as a divergence.

A big move higher still struck me as pretty unlikely. To be candid, I continue to find reversals pretty challenging, as they’re hard to recognize in real time and tough to trade. Looking at the daily chart of SPX, that doesn’t seem to me to be what we have here. Rather, the SPX has been, and remains, in an uptrend, but the price action today didn’t take out any recent highs, or do more – perhaps – than buy some time before heading south.

Still, given what Todd teaches about reading the vertical bars, an attempt to move higher at the outset tomorrow seems pretty likely. I’m not ready to sell into an upside move, but if we’re just going to chop around with a pickup in volatility, concentrating on the shorter term in the futures with 3-minute charts seems like the better row to hoe.

Have a good night, and best of luck tomorrow!