Watch And Wait

S&P e-mini futures are down hard this morning. This is just the sort of thing I would expect to see if the market was going to follow through with one of the bearish scenarios I outlined yesterday. I thought suggesting 1318 or 1222 was extreme. Right now the only extreme seems to be weakness.

It looks that by the regular session, the S&P cash index will make new lows after failing to reach a 38% retracement after being down for three days. This could signal that things are about to deteriorate quickly. However, if it then stalls, a reversal could come from nowhere.

I wanted to get long yesterday but didn't. I was encouraged by the late day rally. But gnawing at me was the fact that from a volume profile perspective, there were no levels of support until around 1405. I don't know if the market senses this too and is merely doing a thorough job of price discovery. Or perhaps it's doing an epic job of fooling people.

There is a 78.6% Fib level at 1415. There is a 1.618% Fib extension target at 1420. But the market may not be satisfied until 1396.56 gets tested. I clearly remember the breakout from that level and tweeted that it was an important hard stop. Perhaps we're about to see how important.

Can the market make a new low then wrong-foot everyone by heading to new highs? You bet. And I will be looking for any indication that selling strength is drying up. This is one of those times when  it's better to watch and wait.