The S&P broke down lower out of a 6 week Balance on Tuesday and closed within the lower 5-week balance. Unless there is a quick rejection, the destination trade becomes the lower end of this balance which is 1387 area.
Looking at the Daily Bar above - notice today's low - same as the high of the 2 day Balance before price broke out and made new yearly highs. Notice also a series of closely matching lows at 1387-88 area which is the destination trade if we continue lower. The Daily Bar also shows today as an Outside Day - which usually means further downside continuation. The profiles, however, provide a different picture -
The Profile above shows that the market is very short - notice the 45 degree line from day's low to the prominent POC i.e. traders were getting short in the hole. This does not mean that market cant go lower - it sure can. However, the odds favor some short covering. Trading lower fills the small gap below at 1401.25 and below that we have a couple of naked POCs from early Sept. Trading higher - targets the 2.25 point Gap above between 1414.5 - 1416.75. The FOMC announcement is scheduled for 2:15 p.m. E. The October 23-24 FOMC policy meeting is expected to leave policy rates unchanged. With the September announcement of QE3 and guidance on low rates to mid-2015, new policy initiatives are not likely. The focus of this statement is likely the status of the economy-notably the labor market. Given that market is waiting for news - I am expecting the first part of the day to be Balanced.
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