Divergence In Futures And Cash

This is one messy decline so far. As bearish as I am, I'm surprised to see the S&P futures hit 1310 overnight. After yesterday's strong bounce over 1318.75, I would have thought that trapped a lot of bears.

One thing concerns me: it was only the futures that made it over 1318.75, not the cash market. It's the cash market that is the final arbiter, not the futures.

The S&P cash market doesn't trade, and is a more accurate representation of price action. Futures trade with leverage and can be pushed all over the place, thus distorting price.

The equivalent price point on the cash index is 1321.33. It was not breached. I'm watching 1308.98 from 2/4 on the cash as the failure point.

Note: the caveat here is that if the S&P is tracing out an ending diagonal, it could go below 1308.98 and still make a new high. This remains a possibility, because one just occurred in the lead up to Tuesday's high. The market is a fractal.

IF the top is in, we should know soon, and there would be little doubt.

It is our job to continuously adapt to changes in the market. Since last August I've adapted to overnight action having a stronger effect than usual and gravitated to using overnight charts almost exclusively. This may be a tell that it's time to adapt once more.

Cash is king.