Email Response

I just wanted to share this email response to a member's question of "How" a potential bounce might look from here, this was before the SPY moved below the morning range...

Answer: "Either it (SPY) could hold support or dip below it triggering stops and short orders and then move aggressively back above the support area, that would be the two most likely ways the market could bounce from here."


The second option would be the head fake concept, as mentioned we see it one every timeframe. The 2 charts posted of the recent hourly bear flag and the daily bear flag were my attempt to show you how every major reversal over the last several months has started with some kind of head fake move, like the April 23/24 move below a daily bear flag, then the SPY bounced.


As far as what the intraday market looks like now, the second option I mentioned in the email above would normally be the most likely option as support is defined this a.m. giving traders a place to place limit orders that pile up on the books and often are run just by virtue of them being there, the volume rebates and the momentum a head fake move creates.


Here's the SPY's move...

 The dip below support of the morning range (1 min chart) in yellow-possible head fake move.

 The larger "support AREA" from yesterday/today and the dip below that.

 The 2 min chart didn't confirm the move lower as 3C made a higher low (positive divergence).

The 5 min chart should be caught up by this time in the day, another positive divergence.


I'll check the other major averages and Industry groups.