After a strong bounce in the overnight trading, the ES found resistance on Tuesday around Monday’s high area. But Tuesday’s rally failed later in the day when a new sell-off began after lunch. At the end the ES closed at 1873.50, or 2.25 points above the previous close.

That close just about at the same level as Monday might give you the impression the market is settling down a little. The selling is a little slower, but the intra-day swings re still pretty wild. Overnight Monday the market bounced 75 points into Tuesday’s open, sold off 85 points into the afternoon, and bounced about 13 points to close virtually unchanged.

Remember that before all this started the average daily range was about 14 points. We are living through an extraordinary moment.

Today

1850 is a key line for Wednesday. The Put buyers are clustered around that level in force, and we are expecting to see the price chop a bit around there.

We may get another bounce today. This is the last trading week in August, and there may be an attempt to repair some of the damage for the month end.

But don’t expect it to last. What we have seen is a large-scale sell-off on heavy volume that has easily broken support areas that had held prices up since January. Absent either a full-throated return of Quantitative Easing or really determined buying from the Plunge Protection Team, or both, the trend is now down, and there is still lots of room for more declines.

This ain’t over yet.

The major support levels for Wednesday: 1828.50-25, 1803-1799.50, 1775-72;
major resistance levels: 1912-13.50, 1925-28 1950-46.50

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Chart: S&P500 cash mini-futures (ESU5) daily chart Aug. 25, 2015

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