Overnight the March E-mini Russell 2000 Index traded higher to 943.10 but failed to follow-through, leading to a sell-off. This pattern may play all day especially since the U.S. retail sales report came out better than expected and the index hardly moved. Both of these patterns indicate that the market may be overbought and out of buyers.
Since the market posted a higher-high on the daily chart, a lower close today will mean a closing price reversal top has formed. If it is confirmed on Thursday then look for a 2 to 3 day break. Based on the short-term range of 892.60 to 943.10, the market may correct all the way back to 917.90 to 911.90.
Last week’s close at 941.50 could also become significant the rest of this week, because a close under this price on Friday will reverse the week to down. This could trigger the start of a 2 to 3 week break.
On the daily chart today, a major Gann angle moves up to 936.60. This angle has controlled the strength and direction of the market since it reached a bottom at 892.60 on February 26. A break through this angle today could trigger an acceleration to the downside.
There is a bullish tone today because of the strong retail sales report, however, the technical indicate an overbought market. This makes the market vulnerable to a bull trap. Those buying strength should keep the position if there is a sustained follow-through, but if it weakens, or falls back below the old top at 943.00, be prepared to exit. Aggressive traders may want to consider the short-side if the intraday charts start to show signs of a reversal.