For nearly two weeks, we’ve been expecting the S&P futures to spear a hidden-pivot resistance at 1249.75, clearing the way for a quick follow-through to at least 1272.75. However, it’s beginning to look as though they might not be up to the task. Yesterday’s stall at 1248.50 created a double top with last Friday’s, and it wouldn’t take much additional weakness for the futures to start unraveling. There’s already a bearish impulse leg on the hourly chart that was generated by Thursday’s breach of two distinctive lows made a day earlier.

All of which merely hints of trouble to come, but we should nonetheless be prepared for the more ominous signal that would be flashed if the September contract were to dip below 1224.00 over the next 2-3 days. The chart above puts this in perspective, showing the two prior lows that matter most from a hidden-pivot perspective. The first is 1235.75, recorded on Monday, and the second is 1224.00, from July 18. Any downtrend from here that exceeds both lows without an intervening correction of more than a day would create a quite-potent bearish impulse leg on the daily chart. While most technicians would read a breach of the first support, 1235.75, as evidence of serious damage, I look for confirmation via a breach of the earlier low, since, according to my proprietary rules, it would definitively end the bull cycle begun a month ago from the July 7 low and threaten the viability of the even larger bull cycle begun in May.

Meanwhile, we hold August strangles in the QQQs, and although yesterday’s weakness dampened prospects for cashing out of the August 40 calls, the August 39 puts that comprise the other half of the position may well have their day. Stochastic engines have been building torque since mid-July, and I therefore strongly doubt that Da Boyz will be able to hold the averages tediously in place until August expiration. Long straddles and strangles looks like a good bet right now, notwithstanding the persistence this summer of expiration-week churning amidst a generally flaccid uptrend.