The S&P500 mini-futures (ESU5) had a nice little bounce yesterday, finishing at 2087.25, some 23 points above the previous close. The futures gained 20 points in the overnight trading, gave most of it back at the day session open, then climbed steadily throughout the day to a strong close near the high of the day.

Terrific. So the decline is over and we can all go back to dreaming about new highs and an endless Bull market, right?

Not quite. There’s a bit of evidence the market’s performance yesterday was based on a little panic buying ahead of the Federal Reserve statement to be released at 2pm this afternoon. It is also likely that after going down fast for five days, the market was ready for a little oversold bounce.

In any case, the real action won’t be known until the Fed statement is released. Then watch out.

Today

The area around 2090.50-2092 – just above yesterday’s high – is the decision point where the market will reveal if it intends to go back up to the 2100-2110 zone or back down to retest the 200-day moving average line. The Fed policy statement this afternoon will have a large influence on that decision..

Until the statement is released, the 2078-2089 zone could be the trading range in the overnight and morning sessions. But after the announcement, just about everything will be a reaction to what the Fed says … or doesn’t say.

The consensus is that the Fed will not raise interest rates now, but may talk up the possibility of an increase in September. No matter what the statement says, the algos will be pushing the price around dramatically, and almost anything can happen. Stay cautious.

Major support levels for Wednesday: 2054-55, 2035-32, 2025-23.50, 2018.50-16.50;
major resistance levels: 2128.50-29.50, 2134.50-36.50 and none

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Chart: S&P500 mini-futures (ESU5) July 28, 2015