I provided three modest, ascending rally targets in a morning update to yesterday’s tout, but the futures never got significantly above the first. Instead, they reversed after head-faking slightly above Monday’s peak. This would have caught bulls with their pants down, especially since the last week has given shallow oscillations in breakout territory, slightly above the key recovery high at 2011.75 recorded on September 17. Under the circumstances, the 23-point selloff that has occurred so far is not nearly as bad as we might have expected. Perhaps sellers are only getting warmed up?
Whatever the case, be prepared for a wicked one-way ride on Wednesday with no significant retracements. My gut feeling is that the hellacious move will be lower, but keep in mind that it would take 40 points worth of downside to trip a major sell signal at x=1949.00. Since a mechanical short there would imply a 2015.00 stop-loss and $3300 per contract of entry risk, we’ll look for other ways to initiate if the opportunity should arise. Alternatively, if the futures head higher, we can use the 2030.75 target identified here earlier as a minimum upside projection. Bears playing for all the marbles, please know that you are shooting for 1752.25, the very bearish ‘D’ target of the pattern shown. That would imply a profit per contract of slightly less than $12,000. _______ UPDATE (10:10 a.m. ET): The futures have slightly overshot d=2000.75 (a=1989.75 on 15-minute at 5:00 a.m.). This is mildly bullish but would have been moreso if the current thrust had gone just a tad higher, surpassing yesterday afternoon’s ‘external’ peak at 2003.75. Let’s see if buyers can pull this off with a running start. So far, though, this morning’s price action is not particularly impressive.