S&P Futures Update for Aug 21, 2012

 

The S&P's have rallied for the last 3 months from the Balance low of 1247.50 and have reached and exceeded their destination. Today the market gapped higher and broke out of the 8-month balance - made new highs - only to Settle back within the 8-month Balance at 1412.50. It is too early to tell if this is a breakout failure. From a Weekly perspective, we are still 1-time framing up.

Tuesday delivered a breakout failure to the upside. Looking at the Daily charts above show balance areas that are close in proximity - a sign of a tired market. Notice how Tuesday's low was the high of the 7-day lower balance. However, looking at the profiles below show Tuesday's Value - overlapping to higher and a POC that did not move down as price auctioned lower. The Profile shows elongation, however, low Volume suggests that this was "Old business" i.e. long liquidation as opposed to "new business" or new money selling.

For tomorrow - I would treat the last 4 days as Balance (1408 - 1417) and apply the rules for trading Balance.  The scenarios are:

1. Remain within 4-day balance; 
2. Look outside of balance and fail; If the market fails on one extreme, the destination trade becomes the opposite extreme. 
3. Look above or below and accelerate. If there is to be downside continuation - look for Price acceptance back within prior 7-day Balance and lower Value.