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| Whips on the SPY 10 min continue during Tuesday's trading |
This kind of trading will persist as long as the US debt crisis remains unresolved. What we're seeing is panic driving futures lower leading to either a gap down in the indices or follow-through selling pushing down prices in the early morning. From there, dips are bought by large funds causing steep rallies in stocks and flat closes on the markets.
As the August 2 deadline approaches without a US debt deal passed, I expect investor jitters to increase as well as volatility in the markets. This was evident today as prices sold off sharply into the close--no doubt traders are looking to protect profits into the after-market session. But as I've mentioned in previous posts, I'm anticipating a relief rally on stocks once an agreement is inevitably made between the two US political parties.
On the daily chart, not much has changed since yesterday. We're still consolidating within Thursday's sharp move up and are trading above the 20 moving average and several key Fibonacci support levels. Assuming a deal is reached before the deadline, and prices don't sell-off, an agreement is the perfect catalyst to cause a rally up from this consolidation pattern and possibly even a hit of the 52 week highs towards 1370.
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| Consolidation on the SPX could push prices higher in the coming days |
Tomorrow will be another mixed bag as the market digests a combination of positive earnings and debt fears. As these factors will effectively cancel out any momentum in either direction, I'm not expecting much action aide from intraday whips.
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