On Friday, we discussed the potential for the S&P 500 (SPY) to roll over from a ‘head-and-shoulders’ pattern following the lower high on Thursday. Indeed, the market did a little more than just ‘roll over’, leaving an entry from the short-side on the neck-line break for only those willing to step in on the intra-day time-frame. By Friday’s end, the S&P was already trading below the old record high at 2137 and pre-Brexit peak at 2127.

Yesterday, the small gap lower was bought aggressively from the start of the cash session and the market never really looked back. A recovery from Friday’s swoon was not the unexpected part, it was the extent. A smallish bounce would have left us with a feeling of more to go, but the strong reflex rally brings that into question and makes the short-term a little less clear.

If the S&P starts to fade back towards yesterday’s low, we will want to pay attention to how it reacts to determine if it is a retest or likely to be another leg lower. Even on a break through the lows at 2108 the trend-line off the 2/11 retest low will come quickly into view.

A push higher from here without seeing a dive back lower will bring the lower parallel into play which kept the S&P pointed higher from mid-July and then not far above a thicket of levels from around 2185 up to the record high at 2194.

For now, the higher volatility environment favors nimble day-traders until we can gain further clarity off the daily chart.