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S&P 500: Possible Bounce Coming On FOMC Announcement

By Tim OrdStock MarketsJul 27, 2022 09:58AM ET
www.investing.com/analysis/sp-500-possible-bounce-coming-on-fomc-announcement-200627713
S&P 500: Possible Bounce Coming On FOMC Announcement
By Tim Ord   |  Jul 27, 2022 09:58AM ET
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  • SPX Monitoring purposes;  Long SPX on 5/31/22 at 4151.09.
  • Monitoring purposes GOLD:  Long GDX on 10/9/20 at 40.78.
  • Long Term SPX monitor purposes; Neutral

SPY Daily Chart
SPY Daily Chart

The FOMC meeting ends today with the announcement 2:00 eastern. Yesterday we said:

“Its common for the market to reverse around the FOMC meeting.  If market rallies into the meeting than can have a reversal down and if market declines into meeting than a reversal up is common.  As you know we do a lot with the tick and TRIN.  The chart can get messy displaying the tick closes so we just recorded the last significant three days readings which came at the May high (we disregarded the tick readings over the “Sign of Strength” in the 4 day MA of A/D which reached 4 along with the McClellan Osc. over +300).  However the ticks won out.  We now have another three day tick readings that has reached extremes again >+1350 ending last Thursday.  This three day tick close suggests short term exhaustion. Might Add today’s tick closed at +794.  The third quarter is also the weakest quarter of the year.  Not looking for a major decline but a pull back is possible.  The TRIN closes back at the mid June low suggest strong support near 365 SPY.  Still long SPX but may be seller shortly.” 

The SPDR® S&P 500 (NYSE:SPY) retraced back to the previous high near 390 ranges on lighter volume which suggest support.  Its looks at though there could be a bounce coming on the FOMC announcement.  

SPY Daily Chart
SPY Daily Chart

Here is a possible scenario that may unfold in the short term. Last Friday’s high came on higher volume than the previous day’s volume and suggested Friday’s high may be tested as most high volume days are tested. Today’s decline broke below Friday’s low on lighter volume, suggesting a false break and the market may reverse short term. This leaves the door open for a test of last Friday’s high. If last Friday’s high is tested and the test comes on light, it will suggest Friday's high has resistance.

As pointed out on page one that there is a lot of high uptick closes, which suggests short-term exhaustion. If indeed Friday’s high is tested and tested on lighter volume could be at least a short-term high.

XAU, XAU/Gold Daily Charts
XAU, XAU/Gold Daily Charts

Yesterday we showed the VanEck Gold Miners ETF (NYSE:GDX) Up Down Volume percent with a 50-day average and the GDX Advance/Decline percent with a 50-day average. In early July, both indicators traded below -20. Previous times when both indicators traded below -20, GDX was at an intermediate-term low. The second window down from the top is the weekly RSI for the XAU/gold ratio. 

Intermediate term lows formed in XAU/USD when the weekly RSI for the XAU/Gold ratio fell below 30 (current RSI lies at 27.61). This indicator generates a signal about once every year and a half, and this indicator lines up well with 50 MA of the Up down Volume and Advance/ Decline indicators shown in yesterday’s report. The more indicators that line up for a low, the more likely a low is being made. This low could be an intermediate-term low, and a potential rally could last into October and maybe longer. 

S&P 500: Possible Bounce Coming On FOMC Announcement
 

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S&P 500: Possible Bounce Coming On FOMC Announcement

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Comments (1)
Zman Trading
ZmanTrading Jul 27, 2022 2:58PM ET
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Thanks! It happened as you suggested it might. Question is if it can hold above +/- 4015
 
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