Holy Grail Squared

The SPX tested its 20 period on the hourlies twice yesterday and rebounded…but to lower highs.

A break now below the 20 period, now at 2343…where the index is set to open, should lead to an extension lower with the 3rd time a charm at least short term for the bears.

Pullbacks to the rising 20 period moving average on all time frames is considered by many traders to be the Holy Grail of dip buying.

Of course, as offered in this morning's report, many money managers who have not favored the fundamental backdrop for this rally have been forced to buy based on technical momentum.

Accordingly, as one big Wall Street strategist stated yesterday, they are simply trailing the market with a tight protective stop.

Mr. Market does not exist to accommodate.

I can't help but wonder whether the trailing stop exit door is going to be too small to allow everyone to get out at the same time.

Consequently, an air pocket may be on the table.

If the SPX jet hits an air pocket, the presumption is a backtest of the breakout point around 2300 is on the table.

Interestingly, this ties to the 20 DAY line.

2300 also ties to 90 degrees down from this weeks all-time high.

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