Making Sense of the Long-Awaited Dip

Support held, but will that continue to be the case?

We have been very fortunate with some of our individual plays over the last few weeks as the indices have been grinding higher. At some point though, that grind becomes a concern and even minor 1% to 2% corrections feel fast and heavy.

I have been suggesting patience over the last few days, waiting for some type of reset in the indices. Just see yesterday’s post in this regard:

That said, I want to preach patience…

The S&P stalled right at our upside target. So let’s give it some time to show us where the buyers are and we can start to fish for optimal setups going into the rest of the year.

That brings us to today, where we’re seeing a decent bounce in the futures ahead of the open.

That does complicate things, though.

Those who were buyers yesterday afternoon — and we called out a pretty sweet reversal setup in the S&P futures — will be rewarded at the open. The question is, do we fade from the open or gain strength?

Bret Kenwell @BretKenwell

$ES_F #ES The washout out down to the ~10-day ema on the daily after a monster rally, to go along with a doji stock on the 30-min chart. doji-up and bulls are in good hands

If we gain strength, we need the ES to clear 4660. That will open the door to the 4680 area, which was resistance on Wednesday. On the downside, it’s preferable that we hold 4645 to 4650 (chart).

For those trading the SPX or the SPY, I will be watching for a 4-hour rotation higher, which happens if the index can clear 4664. Based on the SPY, we will likely open near this area, so let’s see that the SPX doesn’t fade too hard and instead builds above this level. 

If bulls gain momentum over 4664, then 4685 could be on the table. Here’s a daily chart of the ES:

Click to Enlarge | Chart courtesy of TradingView

Here’s a Few More Setups We’re Watching