As we pointed out last week, a unique combination of heavily bearish market participants, extreme levels of short interest, and bullish seasonality offered a recipe for a powerful short covering rally. We have seen exactly that play out since last Friday:
E-mini S&P futures (Daily)
This is the 4th time that the S&P is testing the 1980-2000 resistance zone since the August plunge. Will the 4th time be the charm? Judging by the strength and conviction displayed by market participants during the recent rally I would say the odds favor an upside breakout before the end of the week.
It is also worth noting that we are almost exactly at the seasonal low after which the best returns of the year are typically produced:
