Yesterday was quite an exciting day – the rally was failing at S&P 780 when the Fed made their announcement – and suddenly 780 resistance was taken out “like buttah”.
We are now in the midst of dealing with the next very problematic resistance level at the 800 area. Futures dropped overnight from yesterday’s 794 close down to the 785 level, but have since rebounded to positive territory. This rebound should be considered bullish, as well as the fact that the overnight low stayed well above 780,
For this extension of the rally to stay real, what was resistance at 780 has to now hold as support and provide a floor for the assault on 800. The overnight futures seem to support this.
At this point, there is no reason to be in the inverse ETFs unless we break back down below 780 – and maybe even wait for a break below 750 (the current 3-day bar low, and the next major support level in its own right. A prudent person might choose to wait until 800-804 is cleared before committing back into the long ETFs – however the long ETFs is where the market is currently telling us that the play is taking place.
Technical analysis and chart reading are based upon analysis of chart patterns and price movement. The price movement before the Fed announcement gave every indication that upward move was sputtering out at resistance and would probably reverse. But technical analysis can’t predict for such an exogenous event as the Fed committing to injecting a trillion dollars into the economy – when something like that happens it can truly be a game changer – a fading rally suddenly has a new lease on life. Let’s see if this is enought to boost the S&P into the 800s. If we do pass 804 – look for the 818 area as the next challenge to be met.