Market Tries to Digest Meaning of Fed

The SPY moved back up to the area where it has been finding resistance over the past two weeks; the 200-week average mentioned in our last update. It has been trading in a bullish continuation pattern on its daily charts, but keep in mind that the broader market remains in a long term downtrend, so bullish patterns like this are a lot less trustworthy as the longer term path of least resistance is down.

The Fed left rates unchanged today and the market responded with mild enthusiasm. But again, keep in mind that it usually takes a few days before the market fully digests the Fed statement and as often as not gains made on Fed day get faded within the next day or two of trading.

Right now this market is still indecisive and it needs to prove itself one way or the other before it can be traded aggressively. Proof will come either in the form of a breakout from the trading range or a breakdown. We would tend to get more aggressive with a breakdown than we would a breakout as once again, the long term path of least resistance remains down.