As this momentum continues to shift on the 15 minute time frames, it solidifies the bear's influence. I've marked the momentum shift on the daily charts to clarify. Even though the market recovered from Thursday morning's rapid decline, the recovery was more gradual than the selloff, making it almost impossible to break Thursday's premarket highs. It opened the door for another selloff, which followed a change in momentum on the 5 minute time frame afterhours and into the European open. Before long, the index futures were selling off and gaining momentum on that selloff as Friday's opening bell approaches. It is also, however, running into support once again on the smaller time frames. This support comes in the form of prior lows and the lows of the daily channel of the past several weeks (corresponding to the 10-day moving average).
The exhaustion move into the open will make it more difficult to sustain the selloff early in the regular session without slowing, but it will also limit upside as well. As we saw Thursday morning, stronger-than-average moves such as this have a more difficult time mounting recoveries of similar momentum. The exception is if the selloff is followed by slightly lower lows that shift the momentum before buying returns. Given the daily shift, however, that is unlikely to even be enough to change the outcome at this point and a pullback on the daily charts is likely with a break in the daily channel finally occurring. Nevertheless, the 5-15 minute exhaustion will make new setups unlikely on a 15 minute time frame and it will be lower risk to stick to 2-5 minute setups intraday and swingtrade shorts on the daily time frame.
S&P 500 (Figure 2)
About the Author
Toni Hansen is president and co-founder of the Bastiat Group, Inc., DBA Trading From Main Street. Toni is one of the most respected technical analysts and traders in the industry. She has been trading and educating new traders, money managers, professional market analysts and traders throughout the boom and bust of the last decade. She has worked in conjunction with some of the world's top financial exchanges. Learn more about Toni Hansen and the educational services she provides through her website at http://www.tonihansen.com.