So lets recap what has been happening. There sure has been a lot of volume in the past 3 days on the SPX with a price range from top to bottom of 85 points. So traders where either leaking from their bottoms or erecting from their fronts depending on if they were long or short.
Below is the SPX 30 minute PnF chart I posted last Wednesday. You will see, as I have shown before, why 1594 area (blue area) is an area of support. You can also see why 1578 is also an area of support. If don't see why let me recap. Significant areas of support and resistance are identified by large price moves after the support or resistance level is either broken or prices bounce (up or down) from these levels. In this case, you can see that 1594 acted as an area of resistance twice before it was broken and a large up move ensued. The 1578 area also acted as an area of resistance which was broken and then after been tested (column of Os) prices moved significantly higher. However, it is clear that the 1594 appears to be a much more significant level these days. If you don't believe me just draw a horizontal line on your chart and see what price has done at this level. Keep in mind that with the current daily volatility of the SPX a 16 point move from support to resistance is a bit narrow but may still serve you well intraday.
On Friday we saw prices drop to 1577.7 (just a 1 point off our mark) before staging a triumphed rally back to 1592.43. With the amount of volume that was registered for the past few days I'm starting to become a bit more bullish as I'm viewing this as a large transfer of ownership from the weak hands to the strong hands (just remember even the Rock Biter was no match for The Nothing). Although I probably would not buy right now as typically there is a test of this high volume area after a brief rally. The rally could have happened intraday which means we should see a drop back to 1578 area soon or Friday's daily candlestick could be the start of a brief rally before a possible move lower to these levels. It is on this possible retest that I will assess if a long position is prudent. For now I continue to watch and wait patiently.
Thanks for reading.