Market Summary:
As expected, the SPX continued its downward retracement during yesterday’s session hitting a low of 5522 and closing down 78bps at 5544. As I have continued to write, “I remain confident that price weakness will expand and am focused on the support levels below as downside targets”. Well, this move down did just that taking out the first two of my highlighted support levels (5597 and 5562 (10dma)). I have continued to remain cautious over the past two weeks (broken drum) as negative divergence has persisted between price and momentum /trend. As I have stated, this created a shift in my MOTR model from Positive to Neutral. I wrote yesterday that I fully expected the MOTR model to shift to an outright Negative signal during the regular session and it did. The current peak-to-trough drawdown (Jul 16 to Jul 18) is currently -2.59%. I would not be surprised to see the SPX push back up towards the 5575/5600 level. I do not believe that will hold. The MOTR model suggests there is additional downside risk with a legitimate near-term target of 5400. The 5400 level represents the low of the Jun 12 gap and a 5% peak-to-trough move which is more than reasonable. It also represents the 38.2% Fibonacci retracement level for entire move from the Apr 19 low (ref 4953) to the Jul 16 high (ref 5669). So cool how these data points all overlay so neatly. Again, my cautious stance over the past two weeks has been due to the Neutral model rank. The model has now shifted to outright Negative. Risk remains to the downside. Have a great weekend everyone.
Trade Support:
5500: June 20 High
5400: Low/Base of the June 12 Gap
5300: Previous Resistance/Support
Trade Resistance:
5562: Jul 8 low
5598: 10dma
5622: July 17 high (gap)
5642: Jul 11 high (A)
5655: Jul 12 high (B)
5666: Jul 15 high (C)
