The S&P paused after hitting new intraday highs on Monday, closing nearly flat. While still firmly within the rising channel from October 22nd, we may be looking at a well needed pause to re-calibrate the near term trend. This may involve a retest of the bottom of the channel, or it may involve an even deeper correction, testing established downside support levels.
On a selloff, the most obvious first downside target, looking at the 3 minute chart, is the 2000 level, with its big round number value, as well as being the current location of the lower rising band of the near term trend. Alternatively, markets at points correct through time not price, involving a protracted period of generally sideways price action, which might be the case here, as we digest the recent move before continuing higher.
Weakness in a number of related asset markets, particularly oil and precious metals, both of which are under significant pressure at the moment, and strength in the US dollar and longer dated Treasuries, suggest a potential bout of risk off trade action that could impact equities adversely near term.
On the daily chart, the doji candle the S&P put in yesterday suggests an indecisiveness on the part of both the bulls and the bears. Taking cues from the preceding move, we might interpret this as a continuation pattern, and expect to resume movement in the direction of trend once the corrective phase is complete. Only time will tell at this point; its too early to make major positioning changes based upon yesterdays price action.
Today, on the other hand, should be quite eventful, and help clarify where the market currently stands. Good luck out there.