I wrote yesterday that while the market could break the current uptrend I was leaning more bullish on the production of small caps and biotechs, risky positions that did not indicate any significant fear.
Last night while drawing on $ES_F (S&P 500 Futures) I found the $2083 are likely support. I awoke this to find the alert had triggered but after pulling up the chart found a bounce to the $2086 area. The market in general respected this boundary though IWM was not participating in pre-market, getting as low as $125.30 before trying to work back up.
My thinking at this point was as $SPY and $QQQ were holding well (and even $IBB was green close to open) $IWM would likely try to take an opportunity to fill a gap shown on previous charts. Closing this gap, in my mind, would allow $IWM to run again to test the upper bollinger bands and leading the market higher.
Clearly, that did not happen.
I bailed on all long positions before going into a meeting. Later I was a bit surprised to see just how bad it was getting. $IBB was contributing as well.
I didn’t realize at the time just how bad $QQQ was getting hit.
Today’s candle is the biggest marubozu on that chart. Well done, bears.
We’re already at another inflection point where the major indices are back on significant support. Small caps lost the 20SMA. $QQQ is just above the 50SMA while $SPY lost the 50SMA.
It’s not likely we get another big selloff tomorrow but I certainly don’t expect a rally. We may just get a chopfest rising channel before a continuation move down.
You can see we have a couple of important support points coming in with the intermediate uptrend and the 50SMA. The cluster near $2010 is next logical support.
Talk will ensue soon, if not already, of a potential double top which would be a break of the $2040 to $2045 area. This is not unlikely and would even mean a retest of the late 2014, early 2015 lows. The weekly 50SMA is currently at $1994 while any double top target would be around $1990.
Something to keep in mind.
Look for early weakness for signs of clues. If bulls don’t take control we could be in for another down day though not likely as sharp as today. If you don’t see something solid and have a plan, sit on your hands. This isn’t the time to play hero.