S&P Succumbing to Range Before Debate, Election

September 26, 2016 3:14AM CDT

While the past couple weeks' uptrend remains arguably intact as long as the market sustain levels above 21-Sep's 2126 minor corrective low and short-term risk parameter, it has obviously thus far rejected the upper recesses of the past month's range.  Its return to the middle-half of this range may leave it prone to the whims of aimless whipsaw risk common to such range-center conditions.

The 240-min chart below also shows the former 2144-area resistance as a new support candidate, perhaps reinforced further by the fact that this level is also the 38.2% retrace of Sep's 2100 - 2173-rally.  Nonetheless the market's relapse the past two days defines Thur's 2173 high as one of developing importance and as much a short-term risk parameter from which non-bullish decisions can be objectively based and managed as that 2126 low is one from which bullish decisions can be based and managed.  Welcome to "life in the range".

Emini 240

The daily log scale active-continuation chart below shows that the 2145-area cited above is also the exact center of the 2192 - 2100-range that has constrained it for the past two months.  Such range-center conditions are notoriously challenging as the odds of aimless whipsaw risk are highest and the risk/reward merits of initiating directional exposure are the poorest.  We can envision a (C-Wave) return to the extreme lower recesses of this range as easily as a rebound from the current range center as part of a continuation of a trendy, impulsive sequence up from 12-Sep's 2100 low.  Under such uncertain circumstances a more conservative approach to risk assumption of urged.

Needless to say tonight's Presidential debate and the actual election five weeks from now are prime candidates as factors contributing to a bloody mess of a trading range.

Emini Daily

From a long-term perspective the market's Jul'16 break above the prior YEAR'S resistance between 2105 and 2134 reinstates the secular bull market.  This is a technical fact that also defines 27-Jun's 1981 corrective low as THE key long-term risk parameter this market needs to fail below break the major bull.  As we've discussed at length, the now-former 2105-to-2134-range resistance is considered new support.  Thus far the market has proven this out by recovering nicely from 12-Sep's 2100 low that serves as our key risk parameter from which long-term players remain advised to rebase and manage this risk of a bullish policy.

In sum and as a result of the past couple days' relapse from the upper recesses of the 2-month range, further aimless whipsaw behavior typical of such range-bound conditions should not surprise.  This is a challenging construct for shorter-term traders with tighter risk profiles that are advised to simply move to the sidelines and avoid the chop as the risk/reward merits of directional exposure are poor.  If you must trade here however, 21-Sep's 2126 low serves as the tightest and best risk parameter to a cautious bullish play while Thur's 2173 high serves as a tight but effective risk parameter to any cautious bearish punts.

Emini Weekly

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