So the 2205 level was a big deal, not only because of the recent new high, but because of the sizable gap in front of it. Note that on Thursday, the NDX just kissed the bottom of the gap (2194.35) as it made a high of 2195.40 and then closed 34 points lower.

This morning's failure at that level wasn't necessarily the end of the line for the NDX, but short term, it certainly looks like a spot to sell, and at least for our trading accounts, that what I did.

Here, looking at the bigger-picture chart below (all charts are from earlier this morning), you will note how the 2200 level has once again turned prices back, despite today's sharp pop in MSFT.

Nasdaq 100 (NDX) Double top at 2200

On the shorter-term chart below, you can see how the NDX popped up to Wednesday's gap at 2205, but stalled just shy and sold off sharply from there -- a drop of 29 points from the highs, or 1.3% in a couple of hours.

Of course, there remains a sizable gap from this morning's higher opening. That gap was probed during the morning selloff and has now been narrowed to 2174.82- 2161.52, still a sizable gap that will get filled in the days ahead. There should be little doubt about it.

On the other hand, if the NDX can completely fill that overhead gap at 2205 and take out the double-top highs, that will keep the rally going a little longer.

Nasdaq 100 (NDX) -- Short-Term View Stalling at the Oct. 24 gap

Then there is the S&P futures. It also had a solid day, though not as much of a move as the NDX and Naz Futures. The sizable opening gap was actually more instructive here as it was almost completely filled on the midday pullback as the S&P returned to the 1526 level (though the pullback to the gap is not shown on the chart), leaving the gap at 1525.10 narrowly intact (by less than a point). The point is that if you were watching the S&P, it provided a pretty good clue as to where to buy the mid-morning dip. Nothing else would have given you any such idea.

Now on the upside, the big hurdle remains the Oct. 19 (Crash Anniversary) gap from 1540.50 to 1546.80. The S&P has now popped up into the gap, making a high of 1541.80 (not shown). If the futures can clear the gap at 1546.80 and move higher, it's got a shot at possibly heading back up to challenge the highs.

Of course, the S&P telegraphed the low earlier this week, as it completely retraced the rally following the Sept. 18 rate cuts which, as I discussed last week, was looking like a good likelihood.

Note in the chart how the S&P completely retraced that sharp rally on Sept. 18, almost filling that day's gap, but didn't quite do it. Instead, it bottomed just above the Sept. 18 gap with a slightly higher low on Wednesday -- a double-bottom low?

S&P Futures Retracing the rally from the Sept. 18 rate cuts

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In fact, upon closer inspection, Wednesday's pullback suggests something even more significant. A triple bottom low just above that gap.

On the shorter-term chart of the S&P below, you can see that it's actually a triple-bottom low at the 1495-1496 level (when you include Wednesday afternoon's retest of the midday low).

So there was the low on Monday at 1494.70, and then the two lows Wednesday in the 1495.70-1496.50 area. This triple bottom at that level now suggests two things: 1) even stronger support at that level, and 2) a more serious crack in the uptrend, if and when that level gives way.

This argues for more of a decline than just the filling of the Sept. 18 gap whenever this support level is cracked -- and odds are, it will be. On the other hand, till this level gives way, it is helping to provide a firm undertone to the market.

S&P Futures -- Short-Term View Triple bottom above the Sept. 18 gap

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Even the Dow got into the act, calling the bottom.

It is noteworthy that the Dow closed on Sept. 17 at 13,403 and opened the next day at the same level. Though there was apparently no gap in the Dow, there probably should have been. And if there had been a gap, it would have just about been filled this past Monday, as the Dow bottomed just 4 points above the Sept. 17 close and the Sept. 18 low.

Since pulling back to this level, the Dow has now rebounded over 400 points to this afternoon's highs. Maybe that's enough of a bounce for now. In any case, the Dow has made it clear, that it, too, had been focused on that run-up from Sept. 18.

Dow Jones Industrials Return to the Sept. 18 lows

Source:

Finally, the VIX called a low earlier this week as it heated up to a new multi-week high.

You may recall that this past Tuesday the speculators were back -- especially evident in the NDX as it surged to new multi-year highs. The contraction in the VIX from Monday's intraday highs just shy of 24 to Tuesday's close of 20.41 illustrates this fact. But then Wednesday's meltdown returned the VIX to even higher highs (24.15) on an intraday basis, as shown below. This, no doubt, contributed to the sharp recovery into the close.

Below you will see the lower case "b" at Wednesday's spike high in the VIX. However, this doesn't actually constitute a new Buy Signal because there was no new corresponding closing high. Hence, Wednesday's pop in the VIX gets a kind of "honorable mention" (the lower case "b"), but no new Buy Signal.

VIX Another minor buy signal is in effect

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