Can Bulls Regain Footing After Friday's Fumble?

Bonds and the dollar continue to control the trade.

Technical Edge — 

• NYSE Breadth: 83% Downside Volume

• Advance/Decline: 82% Decline 

• VIX: ~$32

Game Plan: S&P, Nasdaq, Bonds and the Dollar

Thursday’s reversal ended up giving us a near-80% upside day. It would have been greedy to ask for a 90%+ upside day, but it doesn’t matter now. We needed another 80%+ upside day on Friday and instead we got an 80% downside day as the S&P 500 coughed up 2.5% and the Nasdaq fell 3.1%. 

Bulls may feel good coming into Monday with modest 1%+ pre-market gains in the indices, but Friday’s action is hard to ignore. I think we need to remain defensive. 

Remember to keep an eye on the dollar and on bonds for clues on the S&P. 

S&P 500 — ES 

My biggest piece of advice right now? Be patient and #KISS. Just remember that these are difficult environments, we don’t want to force anything with a poor R/R and let’s try to keep things simple — i.e. are we above or below active support/resistance? Are we above or below a key level? 

In the ES, notice we’re below active resistance via the 10-day and 21-day moving averages. We’re below the June low, too. Notice Friday’s rejection out of the 3725 to 3750 zone as well. 

From here, I want to see if the ES can push through the declining 10-day and the 50% to 61.8% retrace zone at 3662 to 3680. 

If it’s rejected, watch 3639 as the key pivot. Below it could put ~3600 in play. 

If it’s accepted above 3662 to 3680, then 3710 to 3725 could be next. 

S&P 500 — SPY