Capitulation?
An eventful and possibly climactic selloff hit the equity index complex this morning on the heels of IBM and JPM, which led the Industrials significantly lower. However, buyers were quickly found leading the SPZ back to unchanged.
Since then, the market found resistance near yesterday’s key area of 1361-1364, and we have found our largest retracement of the upmove, back down to 1348. Volume has been extremely heavy and steady all session. Locals were strong buyers off the limit down seen in the first 15 minutes and one dealer in particular came in and bought nearly 2000 contracts this morning, helping to add fuel to the fire.
From here the market is a coin flip. Time and time again we have shown the ability to rally, but only from lower lows. If we have seen the bottom, Thursday and Friday must be sustainable upmoves. In the meantime, this afternoon will be critical. If we fail to hold this rally, I think the public will have a crisis of confidence in the market and we would be in for some serious damage. However, the probabilites tell us this move is most likely over, and today could be the spike bottom we’ve been waiting for. If this is the case, look for 1380-1390 this afternoon.