Against the backdrop of the much-anticipated interest rate announcement at 2:00 pm ET today, the S&P 500 (SPX) failed to establish a foothold in bullish territory, and has fallen back into the neutral zone, writes Ian Murphy of MurphyTrading.com.
Click images to enlarge. Source: stockcharts.com
The latest attempt penetrated higher than the previous effort in June (arrows) and this time the index managed to close above the 1ATR line for two sessions before giving up ground on Friday. Monday was an undecided day, opening and closing flat, but yesterday brought out the sellers, and prices reversed.
Leaving aside the important fundamental back story for a minute, from a purely technical perspective, if this market is going to continue higher the S&P500 should fall no deeper than the -1ATR line where I’ve drawn a curve.
A failure to hold in the 3800 level will likely see a retest of lower prices at the 3650 level.
Click images to enlarge. Source: stockcharts.com
It comes as no surprise then that the number of stocks making new 20-day lows has been ticking up, driving the Pessimism Indicator higher in the process. A quick glance at the raw Help data also confirms the Yearly Help Indicator (the thin blue line) remains below zero. Check out the July Newsletter for more info on the significance of that reading.
Market volatility remains elevated in light of today’s big event and ongoing earnings announcements, make sure risk management tools are in place and protective stops are set.
PS I know many of you are not using TradeStation or Interactive Brokers platforms, so this week I will be using open-source charts.
Learn more about Ian Murphy at MurphyTrading.com.
