What Happened: U.S. index futures rebounded, negating the weekend liquidation on pandemic worries.
What Does It Mean: During Monday’s session, responsive buyers surfaced at the S&P 500’s balance-area boundary, the low end of the tight range the index has been trading in for two weeks. Since then, the S&P 500 initiated through the poor structure (e.g., low-volume areas) left by the selling range extension, as well as the $3,667.75 high-volume node (HVNode), the most positive outcome.
Given the tempo of the selling, poor structure left behind, and subsequent retracement, it’s very likely that the range extension was the result of weak-handed, short-term buyers liquidating positions in panic.
What To Expect: In light of the small overnight gap higher, the following frameworks apply for today’s trade.
In the best case, buyers hold the the index above its $3,667.75 HVNode. Holding said reference would be indicative of balance after a large recovery; in such case, participants would look for a continuation up to the $3,700.00 and $3,707.75 HVNodes. Anything higher targets the $3,724.25 overnight rally high.
Levels Of Interest: The $3,667.75, $3,700.00 and $3,707.75 HVNodes, as well as the $3,724.25 overnight high.
Bonus: Big-picture breakout remains intact.