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Institutions may be watching our levels

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In the last hour, we've seen some "dueling" program trading premium levels hit at S&P500 Index (SPX.X) 804 -1.8% levels the index traders may be monitoring. My interpretation of this action is that things still look bearish, but does hint that there may be some type hedge short-covering near the 800 level.

S&P 500 Index Chart - 60-minute interval

I had my premium alerts set from this morning's 09:00 Update and started seeing the "buy program" alert blinking when the SPX was trading near the 19.1% retracement of 798, which is very close to the "round number" of 800. After about three "buy program" premium alerts, the SPX began to rally a bit and right when it hit our mid-point of longer-term regression, a "sell program" premium alert was triggered.

This action hints that some institutions may be doing some "squaring" of positions near the 800 level and this defines a near-term level of important support for a trader.

The offsetting "sell program" hints that there is still some bearishness to be had and becomes a shorter-term traders observation point at 812 (hourly high was 811.62).

We did see slight rebounds in both the Dow Industrials (INDU) 7,535 near their recent September lows of 7,460, when the Dow traded a session low today of 7,472, which combines with today's low trade in the SPX 794.10, which undercut its September low of 800.

With these observations, a more "risk averse" bear could lower some index and even stock trade stops just above the last hours highs, but the fact that we've seen the NASDAQ take out its lows and not put up much of a fight after those lows were broken tell me that there are NOT a lot of aggressive bulls to be found and shorts don't look overly anxious to be covering positions.

Jeff Bailey

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