Has the Oversold Rally Run Out of Steam Already?

S&P comes into Thursday under pressure.

Technical Edge — 

• NYSE Breadth: 86% Upside Volume (!)

• Advance/Decline: 77% Advance 

• VIX: ~$20

The VIX continues to say “no worries,” while the price action has a different message. 

We got our oversold bounce yesterday as equities pushed higher. No surprise there, but can we squeeze a bit more juice out of the long side? 

We got an excellent entry on Starbucks yesterday and were able to trim our WMT position. That ought to stuff a few stockings. Let’s keep it short with a look at the indices. 

S&P 500 — ES

From yesterday:

“My gut says not to be too trusting of the rallies, even if the market puts together a multi-day gain. That said, we are oversold and the market has been finding its footing…The better R/R selling opportunity is at 3920-ish, where the ES finds a key pivot level and the declining 10-day moving average.”

With that in mind, there is absolutely no surprise in my mind that the ES is seeing some overnight selling pressure as it made a Globex high of 3919.75 — one tick from 3920. 

From here, see if the ES can regain the 50-day moving average near 3895 ahead of the open. If so, the Globex low could be a pivot area during the RTH session. 

However, the main downside level is 3855 — last week’s low. A break of that puts 3841 to 3848 in play, but more importantly, a close below this level leaves the ES in a weekly-down state and vulnerable to further losses. 

SPY