Notice: To view this week’s big picture outlook, click here.
What Happened: After a liquidation in the backdrop of a longer-term uptrend, U.S. index futures auctioned off their lows and traded back into range.
What Does It Mean: Participants further accepted the upside break of $3,691.00 in the S&P 500, a boundary that attracted responsive selling in the week prior.
What To Expect: Wednesday’s regular session (9:30 AM – 4:00 PM ET) will open on a gap within prior-balance and -range. Given unchanged value and a failure to fill the gap beneath Monday morning’s pullback low at $3,716.00, participants will come into today’s session knowing yesterday’s downside reversal left minimal excess.
Noting: Excess forms after an auction has traveled too far in a particular direction and portends a sustained reversal. Absence of excess, in the case of a low, suggests minimal conviction; participants will cover (i.e., back off the low) and weaken the market, before following through.
Putting it all together, the S&P 500 is trading within a larger bracket; trade between $3,747.75 and $3,714.50 ought to be responsive. Auctioning beyond either reference would end the bracketing process and portend continuation.
Levels Of Interest: Overnight high at $3,747.75, Tuesday’s pullback low at $3,714.50, the upside extension at $3,756.75 and the $3,691.00 break-point.