The weekend passed with no solution to the Government shutdown problem and futures opened +10 points lower on early Monday trading. If things remain like this until the open, we will witness another gap down open just above the 1670 lows. The latest price action from late September gives bulls high chances of seeing the low of the day at the open. Its been a usual pattern of lately whenever we had an openning with a gap down or up to reverse it during the day and close higher or lower. Most of the times the index opened with a gap up, it pulled back down to close it. In the cases where the market opened with a gap down, prices pulled back up to close it too.
Important short-term resistance is found at 1690-95. Prices are testing that level but bulls are unable to break above it. A break above that level will push the index towards 1709-20. The more time it takes to break it the less possible we believe it is. Today’s gap down has brought the index near its 1670 support that if broken will push prices firstly towards 1660 and then maybe towards 1640 if selling is not encountered by heavy buying. Remember 1660 is below the 61,8% Fibonacci retracement. If this downward move is corrective, buyers should appear near those levels and keep the index from falling even further.
Our signals show weakness. Both our EMA crossings are bearish and both our automated system show short to intermediate term weakness in S&P as long as prices trade below 1700-1690. Target for this downward move is 1666-60 where the yellow dotted trend line is. Support below that level is 1630. Breaking below 1660 will increase the chances that the index will fall below 1630 towards 1600-1570. Volatility is increasing the we expect big market moves soon, so be careful and always use stops.
As always, thank you for taking the time to catch up on my thinking.