- 2085 acted as it should, put a lid on the post-FOMC spike
- Support and resistance levels outlined
- Could be do for a bounce soon, watching channel development for indications
Following the un-spectacular outcome of the FOMC meeting, the S&P 500 (FXCM: SPX500) quickly edged above the all-important 2085 resistance level before immediately finding sellers. We have been talking about this level for a while now; it was once resistance, then became strong support, but once it broke, given its importance as support, it then became equally significant as resistance. Simple, textbook technical analysis. Yesterday was a good example of how a major news announcement can be used to establish a position if the market moves to your price level.
The fact that the resulting move lower from the day's peak came with quite a bit of power added another layer of confidence. In addition to this being a critical horizontal level, the S&P retested the broken trend-line off the Feb 11 low as well. It just happened to roughly coincide with our noted level of resistance.
In early morning U.S. hours, the S&P moved down into the 2061/57 support area. It's currently experiencing a smallish bounce off this reaction zone, but if no buyers can be found at these levels, then focus shifts towards the 2035/45 zone down to 2025.
The market has been down five days in a row now (so far working on six), and while a streak isn't an overbought/sold indicator itself, it does suggest risk of a rebound, even if small, is quickly growing. A downward channel could be developing, we will be watching how the S&P reacts to the bottom and top-side parallels.
Check out FXCM's 'Speculative Sentiment Index' to see shifts in trader positioning in real-time.
---Written by Paul Robinson, Market Analyst
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.
Learn forex trading with a free practice account and trading charts from FXCM .