Yesterday, we had yet another instance of buyers failing to show up where they should be the most aggressive. This is a bearish divergence that’s starting to take on importance.

The two reports due this morning as well as Friday's reports should continue to show improving results which of course will get a bullish rally... however, they are already anticipated, already built into price, thus I'll be using any rallies to continue entering short positions until Sep. 29th when month end window dressing should abate any pullback. Going into October is where I would expect the correction, the pullback that breaks uptrend lines and throws real fear into the market.

So far, it appears the SPX has carved out a sideways range over the last 5 sessions between the 1060/1075 zone.

Wednesday's reversal off fresh highs left an "outside day" with the major indices closing on their lows. TRIN, which measures the volume of advancing stocks over the volume of declining stocks, managed to close above the 2.0 level as a result of the aggressive afternoon selling. Typically, a close above 2.0 leads to a "bounce" day sometime during the next 1 or 2 days.

The first key support level to watch on the SPX is the 38% retracement of the current Sept low/high, which falls near 1046 level. If price drops to that level, the 20-day exponential moving average should rise up to meet price in that zone as well. Next support below those two points of interest would be the 50% retracement (1035) which runs along the late-August highs in the 1035/1040 zone.

I'd like to see some weakness down to support zones going into the weekend which can set up some buying opportunities early next week for a month-end rally. If prices manage to shrug off today's sell-off and push higher above the current 5-day range highs, I'd be cautiously bullish...meaning Long for a daytrades only.