First Wave of Selling Done

They don't make this game easy.  I was waiting for a puke out in the final hour of SPX trading to buy, instead there was a fakeout rip higher to 2760 and then a fade of that rip back down to 2730.  And then a bounce off the 2730 area right back to 2750 in just 15 minutes into the futures close at 4:15 pm ET.  And its been off to the races since then.  So this is not a repeat of February.  This is the junior version of that selloff.  More traders were more cautious this time around then back in January/February, so the selloff should be less severe.  Plus the seasonals favor the bulls starting next week.

The most important time of the day isn't the final 15 minutes of cash trading, its the 15 minutes from cash close to futures close, from 4:00 pm to 4:15 pm ET.  That aggressive buying out of nowhere was likely sell bots that had sold the last 15 minutes of the cash close, expecting further weakness into the futures close at 4:15, and instead sold a bounce and got stopped out and exited all at once.  

The trade from 4:00 to 4:15 has been a foreshadow of what is to happen in the overnight session.  On Wednesday, the weakness in the last 15 minutes of futures trading spilled over into the overnight session.  On Thursday, the strength in the last minutes has continued overnight.  The bounce off the lows emboldens the BTFDer who now believes that we've hit bottom, and they are piling into the futures overnight.  

It appears like the first wave of selling is finished and we can look foward to a bounce in the coming days.  Looking at a 50% retrace of the down move from 2940 to 2710, is 2825.  So roughly 2825 is the target for any bounce early next week.  After that bounce, expecting the second wave of selling and a more lasting bottom to be hit, somewhere around 2680-2700.  With the velocity of moves in the bot era, 2825 to 2700 could happen over just 2 trading days.  

Friday's US cash session should provide one good selloff to buy, not sure whether that will be in the morning or in the afternoon.  I would be surprised to see a gap and go trade, as traders usually don't want to get aggressively long over the weekend after such a bad week.