The Fed has spoken and the street has responded. As stated here yesterday the declining volume over the past few days was reason enough to expect a negative outcome from traders after the Fed decision. But what an outcome! A decisive break to the downside on much heavier volume. Price movement also increased and so we had a very bearish price/volume combination. The upward moving price pulse from last Tuesday’s price fractal low of 1460.66 ended at yesterday’s high of 1523.57. The decline has brought us rapidly back into a broad area of support from 1470-1490. We are now testing both the neckline of the inverse head and shoulders pattern and the moving averages. As there are no definitive “sell” signals in my technical indicators I have to continue to believe that this market dip should be contained within the context of the developing uptrend from 11/26.
Of the price scenarios we had been following it is now clear that option (C) held sway. Now we have to see whether the market can hold the 1460 to 1471 area; which includes the previous fractal low, the red moving average and Gann 120 degrees down from yesterday’s high. I will keep the stop on the SPY Long position at 146.30.
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