Day trading – risk off – Dollar strengthens Index falls Bearish pullback as Apple kicked off the move down followed by Google as earnings didn’t meet expectations.

S&P500 emini futures has settled beneath the point of control. The sellers gained control in the overnight session as there is more pressure to move to the dollar and bonds in the face of Spain’s recapitalization and Europe’s ongoing financial crisis. Previous to this week the market has been ignoring the news out of Spain and Greece but this morning Spain is again parsing out money to cover banks.

The point of control on the S&P500 emini futures is 1418, the sellers took control before the US equities market opened. Our next area of support is 1398 to 1402. This is where we got the break out to or swing highs which were tested three times. We have had two distribution periods since September 11, with the the third distribution leg starting with the Apple AAPL sell off from 1460. This last distribution has moved the market roughly 60 points from the highs to break the support at 1418. Normally, we would look for three days selling pressure, then consolidation before the continuation or reversal.

The support is the Psychological number 1400. If investors see the market close down below the 1400 area it could put more pressure on selling and we could see this move to the next target 1384-86 . The emini futures has pushed past the 40 point selling range for a volatile move this past three sessions so we could see it break further to 1365 area for support on the 200MA.

Day trading the S&P500 , it is best to remember that this type of Volatility pre-market will give us short range trading days during the regular market hours. If we retrace back to 1418 and close above here, then there is a chance of reversal and a move to new highs as there will be on ensuing short squeeze from this level.

The dollar index hit support the same time Apple sold off, support on the dollar index came in at 79 and has been gaining with a target of 80.30 which is the previous swing high and resistance. This will be heading to the 50MA where we could see resistance also. The Dollar index is showing a “Golden Cross” where the 50 day Moving average has crossed the 200 day moving average. This normally shows a Long term change in direction. You would see a test to the 200MA in red with a price failure and then break back through the 50 moving average.

Volume on the Dollar index has also been declining with no capitulation in direction.  As volatility enters the market we could then see the volume increase from these lows.

This type of price action could fore shadow a change in Presidency or a decrease in volatility for the Euro. At this point when price hits the 200 moving average, we will have a lower high with possibility of a continuation to the dowside with a projection of 77 and an extreme low of 75.50. This move down could take a few months but would push US indexes higher. The projected price of the S&P500 emini futures would be 1540 to 1580 and an extreme high of 1610.