SP500 fell almost 4% intraday and closed with +0.28%, that's huge turn around. SP500 dipped through 4300 support and stayed atleast 3 hours before turning around and managed to close above 4410. As I mentioned in yesterday report, touching 4300 is highly likely (and happened now), how the price behave at that level sets the tone of the next phase. Its remarkable that buyers are showing up at the level they are expected and supporting the price, any weakness in this area is a big trouble for bulls.
As I mentioned that the above structure from Nov-21 to early Jan-22 is a distribution structure (for more information on the distribution read first article in this blog). Below picture is one to one comparison for the structure and labelling.
Today selloff is similar to Selling Climax as described in Wyckoff methodology and the rally is called automatic rally. In the coming articles I will be presenting this structure as market unfolds.
If today price action is actual Selling Climax (SC)and followed by Automatic rally (AR), then comes secondary test (ST), which means price is going to test 4225 again (as of this writing ES is at 4358, down 50 points from high). This concludes Phase A, then comes Phase B, which will have high spread and volatility moves, if buyers shows up and absorb the supply at this level then we could through series of tests and then this whole structure becomes accumulation, otherwise it will become distribution and more selling will come. We will walk through this as market unfolds.
VIX has risen to 39 and closed at 29.9, that's huge change, this also confirms, buyers are stepping and fear is subsiding for now.
Charts used from Stockcharts.com
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