S&P500 Futures are down .52%, adding to losses after yesterdays late reversal to the downside. The FED did the expected and kept rates unchanged. The initial reaction was a spike higher, but the markets returned to their pre-FED prices and then collapsed into the closing bell.
The chart below reveals the obvious. The market is in the midst of a pull back, the duration and depths of which remain uncertain, but one that will surely, at some point, like every other pull back, will turn into a tremendous buy the dip opportunity.
Yesterdays FED pop had some lasting power, as did the morning Pavlovian spike to the upside. In previous sessions the ceremonial opening spike was swiftly sold and the morning rally morphed into rout. Yesterday that action did not come to fruition and the market looked ready to close modestly higher on the day. But heavy late day selling smacked the market back on its back, and price action remains in the bears court.
The Rope a Dope days of just a few moths ago have turned 180 degerees. Recall at the start of the year the action was sell the rip, or put the pop - as prices rallied out of the gate money was made shorting and selling those intra-day rallies. After the February lows the action reversed. Any early action weakness was bought hand over fist.
I would argue that the market needs a morning dip to reverse the downtrend. When buy the dip returns, we may very well have seen our bottom for this most recent pull back.
We have Brexit, negative interest rates, Bank shares getting pummeled.... why? Are we in the early innings of a 'sell first ask questions later' phase of this market? The Financials are getting clobbered. Negative interest rates are a tightening noose for bank shares. Is there more behind the scenes that we don't know about? Financials continue to lead the way on this pull back. Until they reverse course the market will have a tough time turning around.
The key level on S&P500 futures that the market has not been able to hold.....the same level that was the drop point for the market collapse last August.... we couldn't hold it again. After breaking through it with gusto last week, the market ran out of gas. It's winded. But just how much further is this pull back going to go?
Momentum remains to the downside. The $SPY momentum sell signal was triggered last week - until it runs its course the bias is to the downside.
From a short term perspective I think the most recent pull back has a good chance at staying about the $203.50 level on the $SPY. Couple a move to $203.50 with a momentum buy signal and it will be a good risk/reward to go long.
Have a great morning. See you in the chat room