With Europe and Asia both on the rebound, futures are suggestive of an opening Tuesday gain of around 1%, taking the sp +16pts to around 1648. Bigger weekly charts remain outright bearish though, primary downside target are now the sp'1570s.
sp'weekly7 - near term bearish outlook
sp'daily4b - bouncing to fill the gaps
vix'daily3 - a return to the 15s..or even 13s?
For anyone looking for a major Tuesday gap lower, sadly no. Any hope of continued downside - at least to start a new week, is now completely off the table.
Instead, we're looking at a rather significant opening gap of 1%..and that could easily build to 1.5% by the close.
Best guess for the Tuesday close - sp'1650/52, with VIX 16.0/15.75
Further, based on recent cycles, it'd be surprising if Wednesday did not also open higher..although breaking into the 1660s won't be easy.
With a multi-day bounce now seemingly likely, I won't be looking to short the market until early Wednesday at the earliest. Considering there is another sig' QE on Thursday, I am inclined to wait until 11am Thursday, and then assess the price action/market mood.
Thur morning..short in the 1655/65..and look for an exit on any sig Friday gap lower.
The only question now is whether the sp'1680/85 gap zone is filled in this bounce wave. In the multi-week down cycle of Sept/Nov 2012, the market bounced but was stuck at the 10MA - which is currently 1665, and well short of the higher gap zone.
Perhaps then, just a brief foray into the low 1660s this week..and then renewed weakness?
There might be a late evening update, not least if futures significantly change, although I'm certainly not expecting any overnight swing to the downside.
As ever...a tricky..and frustrating market.
Closing midnight update...
futures are holding their gains of around 1%..so we're set to open in the upper 1640s.
Given the rest of Tuesday ,I have to guess we'll close in the low 1650s..which will no doubt send the cheerleaders on finance TV into a new bout of confidence.
I'd prefer a market short..in the sp'1660s...worse case, I'm wrong, and there is a further 1.5% upside.
Goodnight from London