What’s inside:
- S&P 500 and Nasdaq 100 hold support levels
- Market stuck between a rock and a hard place
- FOMC meeting days tilt bias to the upside prior to announcement
Yesterday, the market started out on a weak note in overnight futures trade, with continued weakness into the early cash session before the indices found a day low and saw some late-day buying. The S&P 500 (FXCM: SPX500) dipped below support around 2080 on an intra-day basis, but managed to close above; this price action resulted in a weak reversal-type day. The SPX also held a t-line off the 2/11 low. The Nasdaq 100 (FXCM: NAS100), which had been notably weaker in previous sessions, did not violate the Friday low and held onto the solid support zone between 4433 and 4450.
The S&P 500 is stuck between a rock and a hard place. Our focus yesterday was on seeing if short-term support could hold and perhaps a swing higher would evolve given the prevailing upward trend and tendency for the market to experience short-lived pullbacks since bottoming in February. However, the S&P has its work cut out for it if it is to run to much higher ground. It would need to clear the 4/20 high at 2111 and 2116 (November peak) and trend-line off the 2015 record high, but would still quickly find additional resistance up through the 2130s until the May 2015 record high at 2137. Not to mention the S&P has already risen by a substantial amount without experiencing a meaningful correction. It's certainly possible record highs are around the corner, but it would be a 'tractor-pull rally' trying to get through.
If the current pullback fails to hold up and the market rolls over, this would be an intriguing development for establishing shorts given it would not only be a disappearing act by buyers, but it would be taking place at a time when the market could use a breather from levels of resistance.
Short-term support comes in by way of the overnight low at 2087 and yesterday’s low at 2077. Resistance clocks in at yesterday’s high at 2097, then last week's high at 2111, and finally the November peak at 2116.
SPX500 Daily: Nov '15 - Present
Today marks the first of the two-day FOMC meeting. For quite some time the general bias for these two days has been upward up until at least the Wednesday announcement and release of the policy statement at 14:00 EST/18:00 GMT time. Given the pullback and broadly bullish backdrop, it would be reasonable to conclude the market will at least remain firm. How the market reacts following the release of the policy statement obviously has to do with any changes in the language and how the market interprets it. We’ll let the market react, then decide how we should proceed.
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----Written by Paul Robinson, Market Analyst
You can follow Paul on Twitter @PaulRobinsonFX, or email him directly at instructor@dailyfx.com.
