We can see from the last several days of market action that we have been forming important support in the 1090-1092 area of the ES futures (bottom chart). Today's trade has been in line with the bullish bias for the day, and a positive Cumulative NYSE TICK has confirmed that, but we also face resistance in the 1110-1112 area and thus a key trading range.
The resolution of this range will be important; failure to sustain recent market strength would position us with a lower high across most averages and the possibility of a test of recent lows from early this month. That would have technicians making hay out of a possible head and shoulders pattern on the daily chart (top chart).
While I'm less than enthusiastic about chart patterns, the possibility that we're seeing a lower high in a broad topping pattern has me concerned about the market upside and ready to position aggressively for a decline if short-term action is supportive.
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