9:18 AM CT - I added the top chart to show how selling pressure (volume at bid exceeding at offer) has dominated in the morning, which has been true for the NYSE TICK as well. As a result, we're building volume and accepting value below the red VWAP line. Still we're having difficulty getting stocks to move below their overnight lows, despite a strong dollar and weak commodities. Should the dollar roll back over, I would expect a short-covering rally in stocks. A break below the overnight lows would represent fresh selling and set us up for a potential trend day to the downside. Volume building around ES 1054; so far we're oscillating around that area.
We've seen a solid bounce in the U.S. dollar overnight, and that has accompanied weakness in stocks, a drop in oil and gold, and a bounce in 10-year Treasury prices. The ES futures (chart above) broke below recent support around 1056, and most recently that price has acted as resistance. Note how we're building volume in the 1053/1054 area; if we reject that area to the upside with good volume, that would place us solidly back into the multiday range. Conversely, inability to stay above the 1056 area would continue the overnight downtrend. It would not surprise me to see continued short-covering in the dollar; if so, that would continue to pressure stock prices. I'll be updating this morning with tweets and posts.
Note: For background on reading the Market Delta chart above, see this post.
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