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The S&P 500 (SPX) is right at a price zone pointing more towards a meaningful give-back in the short-term. This zone of resistance can be viewed through the Fibonacci price and time relationships on the daily SPX chart.
As the chart shows, as of Friday’s close, the SPX resided approximately 16% above its late December lows, amounting to an exact 62% Fibonacci recovery of the entire prior decline from the Sep 21 all-time-high at 2940.91 to the Dec 26 low at 2346.58.
The upcoming week is loaded with potentially significant directional markets catalysts such as earnings from mega-cap industrial names like CAT, BA, and XOM, as well as from technology powerhouses AAPL, FB, AMZN, AMD, and QCOM. At the end of the week, the BLS is scheduled to release the December Employment Report.
To my mind, though, the most consequential potential market-moving “events” will occur Wednesday afternoon starting at 2 PM ET, when the FOMC releases its next policy statement, and at 2:30 PM ET, when Fed Chairman Powell addresses reporters at the post-meeting press conference. The Fed will clearly have Apple Inc. (AAPL)’s earnings news from Tuesday after the bell on its mind.
Increasingly, my view of all of the action in ES (e-mini March S&P futures contract) from the Dec 25 electronic Christmas Day low at 2316.75 into last Friday’s (Jan 18) high at 2677.75 (+15.6%) represents three distinct psychological phases of market influence, which I have color-coded on this chart:
My article last week, “Tale of the S&P 500 Tailwind,” came on the heels of the Emini S&P 500 (ES)’s rally of 100.75 points (4.1%) off the 2019 low and 53.25 points (+2.1%) above the Christmas week close. On its face, the advance was impressive, but recall that I qualified my enthusiasm, stating the following:
“In the aftermath of the Christmas Upside Reversal, last week ES (e-Mini March S&P) traversed a range from 2438.50 to 2539.25… and ALL OF IT occurred on Friday (1/04/19) after Jay Powell acquiesced to the wounded easy money masses, appearing to become a kinder, gentler, and more investor-sensitive Fed Chairman.”
On the morning of Wednesday December 26, the first trading day after the Christmas Day holiday, the ES (e-mini March S&P 500)) plunged to a new three-month corrective low at 2316.75, a full 21.4% beneath its September 21 high. In the hours thereafter, ES reversed strongly to the upside, from an acute oversold condition, and with a bit of prompting from the POTUS.
In my closing commentary in our member room at MPTrader.com, I wrote::