In this post, we’ll break down an insightful market analysis, examining the recent FOMC bar and its potential implications for the broader market. These observations will help you understand where the market could be headed next.

1. What is the FOMC Bar and Why It Matters

The FOMC (Federal Open Market Committee) bar represents market reactions during key economic announcements. This specific bar in the S&P 500 (SPX)has gained attention because, despite some rejection, it shows relatively lower volatility when compared to previous selloff bars. This suggests a potential decrease in fear among traders and investors.

While there was a slight rejection tail, the most significant takeaway is that the volume on this bar didn’t spike. This signals that, while there is some supply (sellers) in the market, it isn’t overwhelming. Historically, markets react with increased supply when panic sets in, so the absence of this indicates that sellers may not be dominating the scene.

Watch the video below for a better illustration:

2. Confirmation of Market Strength

What’s even more telling is the next bar after the FOMC announcement. Instead of continuing downward, this bar shows a reversal, pushing the market higher and testing key resistance levels. This indicates a potential bullish sign, especially when combined with the fact that it didn’t violate previous bars or breakdown support levels.

If the market were truly weak, we’d expect to see the next bars push through previous support and head lower. However, the market not only held its ground but reversed the initial rejection and moved towards resistance. This indicates a strong market with underlying demand.

3. Understanding Supply Levels

The supply level plays a crucial role in interpreting market health. Higher supply typically indicates that more sellers are entering the market, potentially driving prices lower. However, in this case, the supply remained relatively stable.

Even though there was some rejection during the FOMC bar, the absence of a supply spike implies that the market isn’t facing aggressive selling pressure. The bar that follows shows further consolidation, with supply decreasing. This is encouraging for bulls, as it suggests that sellers are running out of steam and buyers are stepping in at higher prices.

4. The Bullish Harami Pattern

A significant portion of the analysis focuses on the pattern emerging in the market: a bullish harami. This pattern, marked by an inside bar with higher lows, is a classic signal of potential upside. Over the next few bars, the market continues to form higher lows, which further reinforces the bias towards an uptrend.

For traders, recognizing these patterns early can provide an edge in predicting market movements. The bullish harami, combined with decreasing supply, signals that the market could be coiling for a breakout to the upside.

5. Key Levels and What to Watch Next

For this bullish bias to be confirmed, the market needs to show some commitment by breaking above resistance levels and sustaining higher prices. Ideally, this should be accompanied by an increase in volume, as this would signal that buyers are stepping in with conviction.

Additionally, look for follow-through bars with momentum to push the market higher. These "momentum bars" indicate strong buying pressure and can confirm that the market is in a new uptrend.

However, if the market fails to break through and attract supply at higher levels, it could face some consolidation or even a minor pullback before making its next move. Keep an eye on whether supply increases significantly, as this could change the market's short-term direction.

Conclusion: The Bias is to the Upside

In summary, the analysis of the FOMC bar and subsequent market action provides some clear takeaways. The lack of significant supply, the bullish harami pattern, and the resilience shown in testing resistance levels all point to a market that is gearing up for an upward move. However, it’s crucial for traders to remain patient and wait for confirmation with a breakout and increased volume.

By paying attention to key levels, volume trends, and price patterns, traders can position themselves to capitalize on the next market move. As always, the market is unpredictable, so it’s essential to remain flexible and adapt as new data becomes available.

Stay tuned for further updates, and remember to keep an eye on supply levels and price action in the coming days – the market’s next move could be just around the corner!

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