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S&P 500 Weekend Update: An Up-Close Look at the Technicals


Levels to watch include 1340 and 1363 (above) and 1324 and 1290 (below).

As per usual, Fed week has proven to be both volatile and pesky.

Monday started with a nice ramp up that overflowed happily into Tuesday. But just as investors settled into their newfound frothy sentiment (dreaming of QE and just-right porridge), the market reversed. Turnaround Tuesday, anyone?

But before we get carried away with the reversal, let's look at why the market reversed. Well, from a macro risk management level, the market has come a long way; 97 points in two and a half weeks. As well, the markets were already more than set up for a sell-the-news event. And technically speaking, the market was pushing into an important Fibonacci up retracement level, 1363. I tweeted about this on Tuesday morning and sure enough, it stopped the rally cold.

So what do we make of the sell-off? Well the drop was steep, so technical repair is necessary. The markets are attempting that today, with a nice sideways move, followed by a rally attempt higher. But I'm afraid it may take a few more days of sideways action to build a base. Levels to watch include 1340 and 1363 (above) and 1324 and 1290 below.

Note that this is the second week into an expected one- to four-week rally off the DeMark weekly buy setup that was recorded two weeks ago. Note as well that much of the rally (and reversal higher) occurred during bar 9, so the next two weeks could be range bound between 1300 and 1365. See weekly chart below.

S&P 500 Daily Chart:

S&P 500 Weekly Chart:

Editor's Note: Andrew Nyquist is an independent investor based in the Minneapolis area. This article originally appeared on his investing and economics site, See It Market.

Twitter: @andrewnyquist
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