Market Summary:
The SPX Index was down for the third consecutive session this past Friday, closing down 71bps at 5505 (low of 5497). Obviously, the current drawdown was expected as I have been cautious for the past few weeks. That caution came as the index finished its run to an all-time high of 5669 on Jul 16 with my MOTR model showing negative divergence and having shifted down from Positive to Neutral weeks before. I actually wrote on that day, “All in (broken record time), I remain cautious at current levels under the current MOTR set up. Obviously, prices can resolve themselves to the upside but I am growing more confident each day that the model will shift to outright Negative in the coming sessions and that support levels below will be tested in the near term”. That day did in fact mark the high for the move and the model has in fact shifted to Negative as the index has now faded over 3% peak-to-trough. Additionally, identified downside support/targets of 5570 (10dma) and 5500 have been hit. Now what? The 5500 level held on a closing basis but I do not expect that to last. My model signals are degrading further setting up for an additional leg lower and a test of 5400 in the near term. That said, a bounce here would be logical but I would not get married to higher prices just yet. As of the writing of this note the S&P 500 front month futures (ESU4) are trading +47bps.
Trade Support:
5500: June 20 High
5400: Low/Base of the June 12 Gap
5300: Previous Resistance/Support
Trade Resistance:
5562: Jul 8 low
5591: 10dma
5622: July 17 high (gap)
5642: Jul 11 high (A)
5655: Jul 12 high (B)
5666: Jul 15 high (C)
