Mr. Market sure knows how to find a way to frustrate both the bulls and bears.
The market continues to consolidated, though today was the most challenging. After a quick bounce on the gap, sellers took over control throughout the early sessions. The bulls refused to lose the battle and immediately pushed the market higher, but sellers returned again in the last minutes of trading to push it lower, but well off the intra day lows. So it's difficult to conclude who won today's battle.
The 1 minute point & figure chart of the S&P above indicated we're in a short-term downtrend. In fact, the trend is down - or consolidation - until the June highs 1,130 on the S&P is solidly broken. From what I see on this chart, today's midday rallies was simply just a dead cat bounce. Coupled with the fact we're overbought, and I fully expect the market to pullback further in the next few days.
The bottom line is the S&P must hold above the key support 1,080 before we closed out the month. A closed below this key level tomorrow could signal deeper correction ahead. In my opinion, as long the S&P remains above 1,090 in the next couple days then we could see a huge rally in the next several weeks after the overbought conditions is removed. Obviously, tomorrow's GDP numbers will move the market. If today's action is any indication, we should expect increase volatility tomorrow.
