SPX had a major reversal to the downside today, one of the biggest ones we have seen in a while. Overnight, /ES and /NQ were trading significantly higher and it looked like another “peace deal” was going to launch the markets higher into another big rally. That all ended at the cash open and it was nothing but down from there.

SPX reversed down nearly 100 points from the open in just about an hour. The momentum of the down move was relentless and it was a broad market sell off. It really exemplified the ‘elevator down’ theory. Was this down move a sign of things to come? NQ lead the way down as it has been lately, reversing over 800 points from high to low.

The daily candle is bearish and I don’t think there is any other way to interpret it. Yes, we didn’t close at the low of the day but I don’t think that matters. A 100 point reversal from the high to low is significant, and a small bounce into the close doesn’t erase that fact. The current theory is that there should be some follow through to the downside.

It’s hard to believe that an intraday reversal of this magnitude won’t see any follow through, but we have been surprised before. Volatility is alive again and while picking directions might be a fool’s errand, I think it is safe to assume at the very least we will be seeing big swings in both directions. A 100 point reversal today could mean a 100 point recovery tomorrow.

The main idea is to position small until the momentum hits, and then ride the momentum in the direction the market is pushing.

Since I spoke about NQ at length during the weekend video, I’ll go ahead and highlight what I was talking about in more detail. We have broken a major support level and the current target is the grey box. Beyond that, there really isn’t much. I do expect dip buyers to step in at some point between here and the grey box though.

We are still about 1000-1500 points away from that box.

This market has once again become about riding the momentum. Having a bullish or bearish bias and sticking with it likely won’t end well. This is not the market to be a bull or a bear, but it is the market to be a trader.

VIX nearly tagged 20 again and if it continues to push higher, the flood gates will open with it. Traders love volatility, and volatility is finally knocking on the door.

We knew there was a lot going on this week and there was potential for big moves. Monday has delivered what we wanted, let’s hope the rest of the week stays volatile.

Good luck!