Consolidation Day

Pre-market futures are flat on a relatively quiet morning. However, traders are still hanging around the upper reaches of the current extreme upswing wondering if the magical news bogey bus tour will continue. You see, Benny speaks at a bankers convention in 2 1/2 hours. And that's the perfect recipe for another news bogey, a government official and a bunch of bank leaders all in the same room at the same time. So you can't really blame the Bulls for wanting to hang around and the Shorts from having their finger hovering over the eject button.

If the market has a normal, unimpeded by a bogart morning. I speculate that traders will continue to consolidate the gains from the past week and a half. That would mean a possibility for an initial consolidation to the 775 - 780 area, and then an intra-day wiggle, a slightly lower high on the 60m charts, and then further consolidation down to the 765 area. The furthest I would expect a consolidation to go today, if we get it, would be 750. But I still think that Benny and the Banks could bogart the market. So I'm not looking for a sharp drop yet, I think the market will hang around, act a little soft, sell a little, wait until Benny yaps, and then decide what to do.

Here is a daily chart of the SPX:
(click on image to enlarge)

Here is a 60m chart of the SPX:
(click on image to enlarge)

So in general, I'm looking for consolidation down to the 780 (or 775) area, a wiggle, and eventually the consolidation to drop in to the 760 - 765 area. But I don't expect a drop down into the lower reaches until after Benny speaks, and even then it may not happen today. So a barring a bogart, a consolidation day is probably on the way.

12:35 pm MT: Intra-day Update: The price action today has gone mostly according to my speculation. The SPX dropped to 780, wiggled for an hour, and then continued on down to the 765 area (766 a few minutes ago).

Here is the current 60m chart of the SPX:
(click on image to enlarge)

You can see the index is now riding into the 50 period MA on the 60m charts, which is the next natural wiggle point.

Here is the current daily chart of the SPX:
(click on image to enlarge)

The 750 - 755 area is the next target in the consolidation, but as I stated pre-market, I don't think it will happen today. I speculate that the market will consolidate again on Monday (and of course, as always, that will be barring a magical news bogey). If the market rides on down another 7-8 points in the next 45 minutes, then watch for Shorts to come in and cover in the last 30m or so. I don't think there are too many Shorts that want to have a ton of open positions going into the weekend.

So far, the day is right on track with what I outlined pre-market. We shall see how it closes.....

1:58 pm MT: End-of-day Update: It looks like only a modest amount of short-covering hit in the last hour. The market is fading to the lows going into the close, which means Monday morning (barring a news bogey) has a good chance of furthering the consolidation, just as speculated.

2:00 pm MT: Market Wrap: The consolidation today was actually fairly orderly, which is what I have been expecting and writing for several days. I think the Bulls won't flee for their lives on this pullback like they did last month. I speculate that Monday may continue the consolidation of the upswing, but the market will try to bounce at a higher low. As long as the pullback stays under control, traders will continue to think "innocent until proven guilty." And there probably isn't a strong catalyst to de-rail that train until the beginning of April when we get to Earnings Warning Season and the early month economic reports.