With the benefit of watching the first 30 minutes, the regular charts have been prepared and are posted below.  While we have yet to see panic selling intraday, or even much selling conviction, the major indexes have been slowly bleeding through major support levels.  We’ve been eying the monthly pivot at 1297.25 in the ES as the last holdout for the bulls, and that was nearly reached this morning.  We would not be surprised to see a bounce from these levels, but would not attempt to fade long below ~1297 today.  Potential short areas/long targets above the upper end of the projected range (marked below) include the 1310.25 to 1310.75 and 1312.00 to 1312.75 resistance areas.

Bid/ask levels that showed 3000k contracts last week have dried up to low 3 digits (see below).  Some major liquidity providers have turned off their algos or, in the case of humans, have simply left the building.  We watched this phenomenon closely  over the summer.  One of two things should occur: tomorrow gaps up big, shorts cover and liquidity returns, or there is another major slide in the indexes.  As to today, short term moves are increasingly prone to erratic, wide swings. Caution is warranted.

1) A reader correctly points out that the critical support area that includes the 20 day moving average for the ES mentioned in the morning report should be 1078-79, not 1178-79.

2) Day-session-only R1 (also the half gap) at 1091.50 held to the tick for the first 30 minutes, which suggests the possibility of a trend up day.  If that level is broken, we would expect at least a test of the lower end of the projected range at 1084.25 to 1085.50.

PPT Day Characteristics

These moves typically occur after 2:30pm Eastern while the market is near a new low or breaking point, with a relatively high VIX.  Another characteristic is a large NYSE Adv/Decl negative ratio.  One that is negative 10:1 going into lunchtime typically assures a weak close.  Ratios of 3:1 negative aren’t what you want. They are easier to manipulate by weak bulls. You want a big scary ratio. It is these negative internals that can clue you into the probability of a PPT push.  A big push on a big negative internal is the tell. To instantaneously swing the market around on these days takes a massive amount of concerted capital.

If you watched the market every day last year you know what this looks like.  Using 5min candles on your favorite index you will see an immediate and massive full body candle, sometimes eclipsing the entire day’s range in minutes.  There is no mistaking this move. 

If the ES gets down to critical support in the next few hours, today would fit the above criteria.  It’s important not to front-run this setup as further downside is possible.  Just something to be on alert for.

2:24 pm EDT:  To continue the Market Profile-based discussion from the morning report, the ES failed just as it was entering the next higher value area and did not respect the 1126.00 high volume level after heading lower.  Accordingly, the ES will likely need to base more in the (purple) value area before heading higher.  Once it accepts above today’s high of 1147.50 in the next higher value area, it has a good shot at another up leg.  A break of yesterday’s low of 1112.75 should lead to a test of at least ~1098 support.

1174.75 to 1176.75: day-session-only S3, fib, last week’s low
1168.00 to 1169.75:  weekly S1, fib, high volume level
1159.75 to 1161.50:  fib, monthly S1 and high volume level

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Update 11:35 am EDT:  Greece was just downgraded to junk status.

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It took all of 30 minutes from the last post to get an unscheduled news event as Moody’s has now downgraded Portugal’s debt.  1194.75 to 1196.00 was strong support from the daily R3′s, monthly R1 and has now broken.  If the 20 day moving average and weekly S1, from 1190.00 to 1191.25, don’t hold on a closing basis, the rally is in jeopardy.  Having said that, the 20 day has been a buying point on the last two tests.  Below is an update of the chart we posted last week.