Market Summary:
As I wrote yesterday, this recent drawdown in the SPX index was expected based on price action and my momentum/trend model (MOTR) having shifted first to Neutral and then to Negative as the index hit all-time highs. I stated yesterday that “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”. Well, the index gladly followed suit with a 1% rally on the day closing near the high at 5564. Despite this upside reprieve, the MOTR model remains Negative and risk remains to the downside. One interesting note, yesterday the index hit a high of 5570 and closed at 5564. This high and close came within 8 and 2 points of the 38.2% retracement level (ref 5562) for the peak-to-trough move from the Jul 16 high (ref 5569) to the Jul 19 low (ref 5497) (see chart 2 below). Note, 5562 is also the Jul 8 low (doji) which I have been repeating in this report since the day of the formation. Interesting when data points overlay so neatly.
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)
