A 2B typically leads to a multi-day correction when taking place on this time frame. This can take the form of a longer trading range with a slight upwards trend channel, or it can lead to a more substantial reversal. The second is more common when the momentum into the second low is slower than the first or when a secondary strategy shifts the momentum. In this case, the pace of the selling into the second low was actually faster than the pace of the move into the first low, meaning that the upside momentum that follows tends to be more limited.
The market held these technical expectations quite well on Monday. The overall pace of the rally off last week's lows has continued to be more gradual than the selloff of the previous week, but at the same time we still experienced rapid upside moves within the channel like I discussed yesterday. These wider swings on the 15 minute time frame are the most lucrative to daytraders and can increase concerns for swingtraders who hold for several days on end since positions can quickly turn from positive to negative and back again. This not only increases the risk of getting flushed out and stopped on a position, but can also increase the chances for a trader to make a mistake such as over thinking the trade and bailing too early or too late.
S&P 500 (Figure 2)
The global scene was a second point of ignition for the market's intraday recovery on Monday. The European Central Bank's proposed plan to assist in the stabilization of European banks involves funding through bonds sales. One of the market's biggest concerns at present is how Europe will cope with a Greek debt default, which appears imminent, and the continuing weakness spreading through its member nations. Any plan at this point elicits positive reactions in the market, although the longer term market stability will rest upon results.