Short-covering provided a strong finish to what might otherwise have been a dispiriting Friday. However, when the rally touched the green line (3442.81), it triggered a moderately appealing ‘mechanical’ short. I did not recommend the trade, however, because the implied stop-loss at 3483.00 would have risked $2000 per contract, and because taking a position over the three-day holiday weekend would have been unnecessarily stressful. We’ll watch from the sidelines when index futures resume trading, but please note that, like AAPL, the E-Mini S&Ps would need to rally only moderately to surpass two external peaks, creating a strong impulse leg. The higher of them lies at 3493.00, and if it were to be surpassed in the first 90 or so minutes, the breach would be warning bears to dive for cover. _______ UPDATE (Sep 8, 8:39 p.m. ET): Far from rallying past prior ‘external’ peaks, the futures look leaden. The easy breach of this ‘D’ downside target at 3323.00 today is bearish and telling us that the next strong rally is likely to be a trap. _______ UPDATE (Sep 9, 10:44 p.m.): Now let’s see if Wednesday’s strong rally was a fake. If it was the real deal, buyers should be able to pop the futures above 3452.25 by week’s end. That’s an ‘external’ peak recorded September 4 on the way down.
ESU20 – Sep E-Mini S&P (Last:3390.75)