9:19 am Eastern - After the drop yesterday, the SPY is back up to the 50% retracement of that move. There are about 40 minutes until the opening bell, as I write this, and they could open somewhere other than where price is currently. But the level at 690.50 has been important for most of the overnight and premarket sessions. The bulls will need to stay above 690.50 to have a better chance at climbing out of the reset from yesterday.

There may continue to be reactions at 690.50, but I’d prefer to use that level as a gauge – the main axis level for today, instead of trading against it. Look for other reasons in real time before using that level to trade against. Also, for what it's worth, there are a lot of levels on the board for today. They are all important in their own right, but look for other reasons on larger timeframes to help validate their importance as support/resistance before trading against them. They are levels of probable support and/or resistance in a "normal" market.

There are still traders and algos that are targeting SPY 700, but yesterday’s drop may have made it more challenging for the bulls to get there easily. If we look at the first 4-hour chart from yesterday, that is a reversal candle. Price is nearly back to the halfway point from the high to low of that big break down / reversal candle. And the halfway point is a good place for the bears to try again to pull price down like they did yesterday. If the bulls can keep climbing this breakdown candle, they’ll need to establish at least one 4-hour candle close above 697.00 for this reversal signal to lose importance. And that likely won’t be easy for the bulls to do now.

We’ve been saying that there is plenty of room below current price for a reset, although the big picture is still bullish. The monthly and weekly charts are bullish in terms of the relationship between price and certain moving averages. What did we see yesterday, though? Price came down and tested the 50-period moving average on the daily chart, as well as the 100-period MA on the 4-hour chart. That’s where the bulls were able to bounce price, but now price is below most of the important moving averages on the shorter timeframes. This makes the shorter timeframes more bearish now. Therefore, it would be entirely feasible for the bears to come out again and try to drive price down from where they are currently.

Yesterday morning we talked about a bearish consolidation on the 2-hour chart. Well, that played out more than I expected. And in doing what they did, it created more interim bearish signals. So bottom line, while the big picture still has SPY 700 in its sights as a target, there is still room on the downside for more reset. If the bulls can’t get to 700 and finally give up trying, it will likely happen from the lows.

A longer-term drop probably won’t happen from say, 698.00 or somewhere up there. It would be more likely for the tension to finally break when price is extended on the downside. Like, for example, if price finds itself down around 675.00 and we get a daily close or two below that area, then things could start moving down in a bigger way. The next leg in the market, in other words. But where price is currently is very much in the middle of stuff. With all the caveats and possibilities explained above, be aware for possible big moves in either direction today and in the near future, as price finds its balance.

There is a PMI data release at 10:00 am Eastern, so be aware of where you’re at leading up to that time. Trade well today.

Trading by the Ticks & Trades Strategy, here is where you would have landed for the day:

SPY 690.50 was indeed important today and served as our axis level well. Price could not stay above, and that put the ball in the bears court. In the Game Plan from this morning, we suggested that 690.50 not be used as a tradable level unless we saw something that could help validate its importance as support or resistance in real time. The case could be made that at 10:26 am, going short at the level when the level was retested, and giving the bears room to defend it would have been the place to trade against this level. But in keeping with the Game Plan, we are not counting any trades at this level. It's good to observe that the level was important and would have worked for two Base Hits, per the rules, if you did decide to trade against it today.

The one official Base Hit trade was at 682.83 on the long side. Price bounced there and handed over the profit per the rules, and then later reacted even more and from a more macro perspective, that area was the low of the day. Yet another important level identified before the market opened for the day.

Per the rules, a total of 4 ES points for the day.