The SPY hit the zone of selling that turned advances back twice before. While the close was in the upper half of the daily range, it was below the high of the day. The range narrowed and volume increased, all indicating that the market is again running into supply at these levels. The futures closed in the lower half of its daily range and as we shall see, it ran into obvious supply.
The futures bottomed around 12 noon on 12/29. They tested that bottom twice, at 1:15 and 1:45, each time with less pressure apparent and then demand kicked in, allowing prices to rally vigorously at 2:05 and 2:55. The es then rallied with little supply pressuring the market and some demand until 12/31 at 1:05. After this all rallies quickly spike on elevated volume and fall back rapidly. 2:40 is the last rally attempt and the selling that ensued caused the largest break since the move began 12/29 and probably could be a sign of weakness on an intraday chart. The small intra day demand line was also broken.
On the futures thus far the action does not seem like absorption of over hanging offerings but rather distribution. I believe another attempt to rally can be anticipated and we will keep an open mind, but so far the stabs at new highs for the move with rapid fall backs seems like distribution. Time will tell
