And just like that, the market is right back into the same trading range that it’s been stuck in for two months. I mentioned Monday evening that “Support levels were broken across the board”, and the only thing that could change that was a quick reversal that gets the S&P back above 1120. To be honest, I didn’t think that it could actually happen. But clearly the market doesn’t care what I think. It’s going to do what it wants to do in order to frustrate the most amount of market participants as possible. After all, that’s what Mr. Market is here to do.
Here is the chart of the S&P500 ($SPX) – back home on the range:
Some are asking what caused this 6% rally in 7 1/2 market hours? I described what causes this sort of action on Monday,
“Sometimes, you see temporary breaks of support that cause short squeezes because the shorts get caught. In other words, obvious support levels get breached, and very quickly price recovers and gets back above it. Longs that were stopped out need to buy back. Shorts getting squeezed have to buy back in order to cover. The natural buyers at that price are buying, causing more shorts to cover and stopped out longs having to buy back. This cycle creates a vicious rip-your-face-off rally. I don’t think this is one of those cases.”
Well it was.
We know where support is: 1100-1120. We know where Resistance is: 1220-1230. Until one of these is broken, we’re still Home On The Range.