There was a 26 point reversal in the futures last night to the upside after the market digested the news about the downgrade of Italy. With the 50 day moving average (widely monitored by institutions and large traders) sitting at 1225.75, today and tomorrow are the best shots for the market to regain this important level.
Failure to hold on to it will likely be catastrophic for the near term, so give it a few days. The market is developing some interesting patterns and has options. Price can change wildly from here.
Yesterday was textbook Fibonacci: it bounced off the exact 38% retracement of 1136-1220, the range from 9/12-9/16. This behavior is yet another reason why failure to regain and exceed 1220 now would be extremely bearish.
The Fed's two-day meeting starts today with the announcement tomorrow. Expect volatility.
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