After 6 up days in a row, we're looking for the S&P to go south

By: Danny Riley

It’s OK to say you are unsure what’s going to happen next. A few weeks ago 90% of everyone we spoke to called for lower prices. The most recent rally is another prime example of when the bus gets too full.

That said, most of the shorts have covered and most people we talk to think the S&P still has more room on the upside. According to the Ned Davis S&P cash study,the Friday before the Sept expiration has been up 19 and down 9 of the last 28 occasions and Monday has been up 16 and down 13 of the last 29. Yesterday the Pit Bull told me that 3 of his indicators are saying the S&P is overbought, and we agree. With that in mind, we lean to selling rallies today. We may look to buy weakness, but with the S&P up 6 days in a row the market is overdue for a down day.

Please don’t forget about the Pit Bull’s Thursday-Friday low, and complementing that idea is the Ned Davis S&P cash study for the September quadruple witching.

As always, keep an eye on the 10-handle rule and please use stops when trading futures and options.

• In Asia, 9 of 11 markets closed higher: Shanghai Comp. +0.64%, Hang Seng +0.07%, Nikkei -0.26%.
• In Europe, 7 out of 12 markets are trading lower: DAX +0.12%, FTSE +0.14%.
• Morning headline: S&P Futures Seen Lower As European Markets Pull Back
• Total volume: 1.84 million ESU and 21k SPU
• Economic calendar: Jobless claims, import-export prices, natural gas, 30 year bond auction.
• MrTopStep Closing Print Video

• E-mini S&P (Sep)1686.50-2.25 - -0.13%
• Crude106.57+0.08 - +0.08%
• Shanghai Composite2255.604+14.336 - +0.64%
• Hang Seng22953.721+16.58 - +0.07%
• Nikkei 22514387.27-37.801 - -0.26%
• DAX8492.98-2.75 - -0.03%
• FTSE 1006590.64+2.21 - +0.03%
• Euro1.3315