The late in the day rally up to 2038 continued higher in the overnight session. S&P futures rallied up to 2048, 24.50 points above the closing range pull-back to 2021.
The overnight rally encountered resistance at the lower edge of Monday’s trade cluster, and the S&P sold off 18 points, pulling back to 2028, before auctioning up 11.50 point to 2040 at the time of this post.
In the previous session, the broad benchmark S&P 500 sold off 41 points below the prior days high at 2062, pulling back to 2013, before auctioning up to 2036. The retracement was followed by a 15 point pull-back to 2021.
The month of January has witness increased volatility, with the S&P selling off below the 12-28-14 all-time record high at 2088, pulling back to 1884 on 01-06-15, auctioning up to 2062 on 01-08-14 only to sell back down to 1970 on 01-15-15, before re-test the 2062 high on 01-21-15.
While the global markets have been supported by accommodative monetary policy from the Central Bank, including a new QE program from the ECB, economic data continues to indicate slow growth.
Today the markets are likely to be extremely volatile as the Federal Reserve announces its latest policy guidelines.
The consensus is that the FOMC at its 2-day meeting that ends today will leave its interest rate and policy guidance unchanged. There will be no updated forecasts released after today’s meeting and Fed Chair Yellen will not hold a post-meeting press conference.
The FOMC at its last meeting on Dec 16-17 just switched its guidance to “patience” from a rate hike after a “considerable time” and there is not likely to be any change in that guidance for at least the next couple of meetings.
There are serval negative factors to consider. Yesterday’s data showed as unexpected decline in U.S. Dec durable goods orders by -3.4%. There are concerns regarding corporate earnings after disappointing results from Microsoft, Caterpillar, Procter & Gamble, and DuPont.
Thus, with no new insights expected from the Fed, there is little in the way of fundamental data to support at break-out above the January 2062 high.
The middle portion of the range is unstable. As we observed yesterday, the S&P can sell off 36 to 50 points at any time.
The January low at 1970, and the December low at 1960 is major support. Above the low the 1998-2000 price level is Key.
Support has also held at or near the 2012-2016 price level.
The overnight high represents minor resistance and is prone to short covering. The 01-07-15, 01-22-15 high at 2062 is the upside break-out point.
Coming into the open minor support is at the overnight low 2029; yesterday’s closing range low at 2022. A break-down bel0w 2034 is likely to trigger a sell-off. If Support hold at 2034, short positions at the overnight high are at risk.